Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

CUSTOMS ANNUITY AND BENEVOLENT FUND BILL

UNIVERSITY OF LONDON BILL [Lords]

As amended, considered; to be read the Third time.

BRITISH RAILWAYS BILL (By Order)

BRITISH RAILWAYS (SELBY) BILL (By Order)

ORKNEY ISLANDS COUNCIL BILL (By Order)

SHEFFIELD GENERAL CEMETERY BILL (By Order)

Orders for Second Reading read.

To be read a Second time upon Tuesday next.

Oral Answers to Questions — DEFENCE

United Nations Peacekeeping

Mr. Hooley: asked the Secretary of State for Defence if he will have discussions with other Defence Ministers of the EEC on joint exercises designed to train forces in the techniques of United Nations peacekeeping.

The Secretary of State for Defence (Mr. Frederick Mulley): Her Majesty's Government attach importance to the training of forces in the techniques of United Nations peacekeeping; but I see no requirement at present to discuss this subject with Defence Ministers of other members of the EEC.

Mr. Hooley: Would my right hon. Friend agree that some of the countries of Western Europe, our own included, are well placed to play an intermediate role—obviously below the level of the super-Powers—in peacekeeping operations in areas such as the Horn of Africa at present? Would it not advance the cause of international peacekeeping if we considered exercises between Western European countries in this context?

Mr. Mulley: I would have thought that any such discussions were better undertaken in NATO than within the EEC, which has no defence obligations. It is difficult to see how such exercises would help in the objectives that my hon. Friend properly wants to pursue—namely, increasing the possible security role of the United Nations in this way. We had asked, in the proposals for the Special Session on Disarmament, that this should be a matter for consideration. However, I do not think that the carrying out of exercises in circumstances quite different from those that would happen on the day would take us any further forward.

Island Class Patrol Vessels

Mr. Edwin Wainwright: asked the Secretary of State for Defence if he remains satisfied with the contribution of the new Island class of patrol vessel to fishery protection of offshore defence.

The Under-Secretary of State for Defence for the Royal Navy (Mr. A. E. P. Duffy): Yes, Sir. I am very satisfied


with the new Island class vessels. Four are now operational and a fifth will conduct its first patrol in April. Their sea-keeping qualities and endurance make them well suited for their offshore protection role.

Mr. Wainwright: In spite of what my hon. Friend has said, is he really quite satisfied that these vessels are playing a useful part in protecting our fishery grounds? Is it not true that they continue at a speed of 16 or 17 knots in a force eight gale when a small fishing vessel's maximum speed is only about six knots? Also, will my hon. Friend say something about the relationship between the Island class vessels and the Nimrod aircraft?

Mr. Duffy: Our experience is that the measures we have taken have proved adequate so far. If they are not adequate, we shall review the position. Equally, our experience confirms that these new ships and the Nimrod are complementary elements in our offshore force. I hope that my hon. Friend will accept that the recent decision to order two extra Island class vessels is eloquent testimony to our confidence in them.

Mr. Banks: Is the Minister satisfied that all the defects in this class of vessel have been eradicated, and is he satisfied that there are a sufficient number of vessels for the task of fishery protection? Would he not prefer to build more Royal Navy ships than to subsidise the building of Polish ships?

Mr. Duffy: I cannot follow the hon. Member on the last point. On his first point, there have been a few operational defects in the Island class vessels resulting in patrol time being lost. These difficulties have since been resolved. On the question of the contribution of the Island class vessels, the fifth, HMS "Lindisfarne", will enter service in April. Hon. Members should remember that the concept, design, construction and putting into service of these vessels has all taken place since 1974. The whole House will agree that this is a remarkable tribute to the Royal Navy, and it shows the way in which we can react quickly to demands of this kind.

Mr. Welsh: Will the Minister state his plans for the introduction of helicopters

on ships specially designed for protection and defence work in the North Sea?

Mr. Duffy: Island class vessels are not designed to carry helicopters although they can receive men and stores delivered by helicopter. If there is a need for a patrol vessel to carry helicopters, this will be done. We are constantly examining the adequacy of our measures, and we are looking very closely at the next generation of patrol vessels.

Mr. James Johnson: Will my hon. Friend say what is the precise function of the two new extra vessels and what they will do? In this context, since we need more than two, will he turn his mind to the value of airships, never mind helicopters?

Mr. Duffy: The two extra Island class vessels have been ordered to assist the Ton class MCMVs of Coastal Division and also to engage in purely naval tasks.
On the last point mentioned by my hon. Friend, he knows that I have invited him and some of his colleagues to come into the Navy Department to discuss the matter of airships with those who are best fitted to do so—namely, the officials.

Chieftain Tanks

Mr. David Mitchell: asked the Secretary of State for Defence if he remains satisfied with the operational state of Chieftain tanks with BAOR.

The Under-Secretary of State for Defence for the Army (Mr. Robert C. Brown): Yes, Sir.

Mr. Mitchell: Does the Minister deny that these tanks are having to be can-nibalised to keep them going? How does he reconcile that fact with the assurance he has just given? Is he the only person who is not aware how serious the situation is?

Mr. Brown: Yes, Sir, I do deny it. There is no question of any shortage of spare parts at present. The hon. Gentleman unfortunately appears to be suffering from that dreaded malady from which a good number of British people are suffering—namely, self-denigration.

Mr. MacFarquhar: Is not the Chieftain tank under-powered?

Mr. Brown: The continuing programme of modification to improve the


reliability of the L60 engine is going well. The mileage achieved is of the same order as that of other NATO tanks. I am not aware of any members of the German, French or United States Administrations who have criticised their tanks in the way that our hon. Members seem to do.

Mr. Churchill: Is the Minister aware that the average for most of our Chieftain tanks is well under 1,000 miles per failure of engine? That is substantially lower than the rate of our allies and is about one-quarter of the mileage achieved by the engines that we are supplying to the Shah of Iran. Why must the Rhine Army always take second place?

Mr. Brown: The hon. Gentleman is again, as is frequently the case, ill-informed, because it is not true that engine failure rates occur at well under 1,000 miles. [HON. MEMBERS: "What is the figure?"] They compare favourably with our allies.

Mr. Litterick: Will my hon. Friend say how effective is the operational range of the Chieftain tank compared with the Russian T72?

Mr. Brown: That question is under consideration at present. [HON. MEMBERS: "Oh."] Hon. Gentlemen may laugh, but until now we have always been well ahead of anything in the Warsaw Pact countries in terms of fire power.

Mr. Goodhart: Is the Minister aware that, if the Chieftain tank is to be effective on the battlefield, it has got to get there? Many of the tank conveyors are older than their drivers, and some conveyors have travelled more than 250,000 miles. When will these tank conveyors be replaced?

Mr. Brown: It is true that the tank transporters are now getting towards the end of their normal life, but they are being reworked all the time. I assure the hon. Gentleman that I have no doubt at all that, should the need arise, our tanks will be in the right place at the right time.

Northern Ireland

Mr. Biggs-Davison: asked the Secretary of State for Defence whether he will make a statement on operations in Northern Ireland.

Mr. Robert C. Brown: The Armed Forces continue to operate with success in support of the police in Northern Ireland. With them they have responded promptly and firmly to the recent upturn in violence, adapting their tactics as necessary to meet the threat posed by the terrorists. We are keeping a close watch on the situation, and the level of operations will be stepped up further in any area where this may become necessary.
The House will have heard of the death of Lt. Col. Iain Corden-Lloyd at Jonesborough last Friday. I am sure that the House will wish to join me in expressing our deepest sympathy to Mrs. Corden-Lloyd and her family, and, indeed, to the Second Battalion, the Royal Green Jackets, which has also suffered a grievous loss.
It was my privilege and pleasure to know Iain as a superb commanding officer, a very great and gallant soldier. The Army and the nation are much the poorer with his untimely passing.

Hon. Members: Hear, hear.

Mr. Biggs-Davison: I appreciate that at Question Time yesterday the Secretary of State for Northern Ireland acknowledged the value of the security measures suggested by the Opposition and accepted by the Government, but did not the right hon. Gentleman mislead the House by asserting that my hon. Friend the Member for Abingdon (Mr. Neave) shared his previous complacency about the tide having turned against the terrorist? Will the Minister go further than the remarks he has just made and say that he will increase Army, and particularly SAS, activity in the Province? [HON. MEMBERS: "Speech."] I welcome what the Minister said about the grievous loss suffered by the nation in the helicopter crash. May I ask whether any conclusions have now been formed about the reasons for that crash?

Mr. Brown: A board of inquiry has been set up to investigate last Friday's helicopter crash. The cause has not yet been determined. Nevertheless, I repeat what my right hon. Friend the Secretary of State for Northern Ireland said yesterday—namely, that none of the casualties had gunshot wounds and that there is no evidence of damage to the helicopter by gunfire.
The remaining matters mentioned by the hon. Gentleman, as I am sure he will agree, fall to be dealt with by my right hon. Friend the Secretary of State for Northern Ireland.
When the hon. Gentleman suggests that we should increase the number of units in Northern Ireland, I think that he falls into the trap of believing that weight of numbers is the way to defeat terrorism. I am satisfied that there are sufficient troops to deal with the threat and that we have the necessary degree of specialisation to counter terrorist activity.

Mr. Speaker: To be fair to the House, we must have shorter supplementary questions and answers.

Mr. Powell: Does the Minister agree that the recent atrocity would have been neither more nor less likely to occur if there had been 500 more or 500 fewer troops in Northern Ireland? Will the Administration continue with their policy and increasingly apply short-term troops in Northern Ireland to undertake those tasks for which they are indispensable, so that the main functions may increasingly be performed by the RUC, the UDR and the reserves?

Mr. Brown: I am grateful to the right hon. Gentleman for that intervention. It underlines the point I recently made to the hon. Member for Epping Forest (Mr. Biggs-Davison) that if we had had a thousand more troops in the Province last Friday it would have made no difference to the situation.

Mr. Biggs-Davison: I did not say that.

Mr. Brown: I agree with the right hon. Gentleman that the way to deal with these murderers is to get them into a court on criminal charges, and we can achieve that objective by obtaining the supremacy of the RUC.

Sir Ian Gilmour: In view of the Minister's reply to the supplementary question by the right hon. Member for Down, South (Mr. Powell), should it not be made clear that my hon. Friend the Member for Epping Forest (Mr. Biggs-Davison) spoke of greater activity rather than more units?

Mr. Brown: The right hon. Member for Chesham and Amersham (Sir I. Gil-

mour) has occupied my position on the Front Bench, and he knows full well that the activity of the Army is decided by the General Officer Commanding.

Recruiting (Wales)

Mr. Wigley: asked the Secretary of State for Defence how many persons were recruited to serve in the Armed Forces from Wales during 1977.

The Under-Secretary of State for Defence for the Royal Air Force (Mr. James Wellbeloved): A total of 1,840 Service men and Service women were recruited from careers information offices in Wales during 1977. This does not include officers and all entrants to the Queen Alexandra's Royal Naval Nursing Service since they are recruited on a central basis and regional figures are not readily available.

Mr. Wigley: Does the hon. Gentleman appreciate that there is dismay in many parts of Wales at the fact that, as quickly as the unemployment figures rise, so do the number of hoardings urging people to join the Armed Forces as a career? Does he accept that the best kind of people to get into the Armed Forces are not those who are forced in by economic circumstances but those who wish to go in to make it their career? Putting up hoardings in proportion to the number of unemployed is not the right way to do it.

Mr. Wellbeloved: The best people to join the Armed Forces are those with a dedication to the protection of freedom in this country, including the Principality of Wales, and the motivation and desire to be of service to this country.

Mr. Geoffrey Johnson Smith: I accept what the hon. Gentleman says, but is he not disturbed and rather ashamed that so many people want to leave the Armed Forces as a direct consequence of the Government's wretched attitude to the Armed Forces' pay? That is what he should be worried about.

Mr. Wellbeloved: There have been irresponsible actions and statements by some Opposition Members who seek to gain the maximum political advantage from every difficulty that this country has faced and is emerging from. There are 80,000 people serving in the RAF, and the numbers applying for early retirement


are few in comparison with the overwhelming number who are still determined, despite their anxieties, to continue to do a first-class job.

Empty Dwellings

Mr. Grocott: asked the Secretary of State for Defence what is his latest estimate of the number of empty defence houses.

The Minister of State, Ministry of Defence (Dr. John Gilbert): About 18,800 Service married quarters were vacant in the United Kingdom on 15th January 1978. While there has not been time to make a final analysis of the figures, a preliminary assessment indicates that some 6,800 are empty for normal management reasons, an estimated further 4,000 are held for known and possible future deployments within the next four years and some 3,000 will be offered for disposal during the next 12 months. During the last two years, 1,870 have been offered to local authorities on a short lease. A total of 490 have been accepted, 1,030 have been rejected and 350 are still under negotiation.

Mr. Grocott: Is my right hon. Friend aware that we are still talking about 15 per cent. of his Department's housing stock being empty? Does he agree that this is an unacceptable figure, and will he instruct his local housing officials to liaise with the housing departments of local councils in order that these houses can be used to help with housing waiting lists, even if on some occasions this can be done only on a temporary basis?

Dr. Gilbert: I take my hon. Friend's point about working as closely as possible with local authorities, but, as I have pointed out to him, we have offered 2,000 houses to local authorities on short leases and only one-quarter of them have been taken up. Among the problems are the facts that the houses tend to be in small packages, local authorities do not have the funds, and the houses are in inconvenient areas.

Mr. Goodhew: How many of these houses are empty because members of the Armed Forces simply cannot afford to pay the rents because of their abysmally low pay?

Dr. Gilbert: A complex of factors determines whether quarters are empty at

any one time, and it is impossible for me to give the hon. Gentleman a precise answer. I accept that accommodation charges would be one factor, but there are many others, including the fact that the trend towards home ownership in the community at large is increasing—I am sure that the hon. Gentleman welcomes that as much as we do—and mortgage rates are lower than at any time in the past four years and lower than when we came to office.

Mr. Stoddart: Is my right hon. Friend aware that 100 of these empty houses are in Wiltshire and that 42 in the area of the Thamesdown Borough Council, adjacent to my constituency, have been empty for more than two years? Will he give us an assurance that he will redouble his efforts with local authorities, because the fact that these houses are standing empty causes a great deal of offence to homeless families who desperately need housing?

Dr. Gilbert: I take my hon. Friend's point. It is difficult for people who are desperate for accommodation to realise why some houses have to be kept open for the Services' needs. My hon. Friend has the advantage of knowing far more than I about the affairs of Thamesdown Council. I shall look into what he has said and write to him.

Mr. Onslow: Has the right hon. Gentleman made any effort to find out how many of these houses are empty because Service men cannot afford the rents? Does he not think that he should have that information?

Dr. Gilbert: We started studies several months ago into trends in home ownership in the Forces, and we are trying to make forecasts for several years ahead of the availability of surplus accommodation so that we can dispose of it as early as possible. Decisions by individuals to vacate married quarters are determined by a complex of decisions by individual families. It is not possible to simplify these matters.

Pay Review Body

Mr. Litterick: asked the Secretary of State for Defence how many members of the Armed Services' Pay Review body are serving members of the Armed Services; and what are their military ranks.

Mr. Mulley: None, Sir.

Mr. Litterick: Does not my right hon. Friend agree that it would be at least a minimum recognition of the intelligence, sense of responsibility and dignity of members of the Armed Forces if the body which determined their rates of pay and conditions of service were at least as representative as in the case of an agricultural wages board or a wages council?

Mr. Mulley: Members of the Review Body report to and are appointed by the Prime Minister. It has been the view of successive Governments that appointing to an independent Review Body a person who would benefit as a result of its deliberations would reduce its independent status. For that reason, while there are people with wide experience of all manner of wages negotiations on the body, there are no representatives of persons whose pay and conditions are under consideration.

Sir T. Kitson: Will the right hon. Gentleman ask the Review Body to make inquiries to discover how many Service men are financially worse off in the Forces than they would be if they were unemployed?

Mr. Mulley: With respect, that is not a helpful question. It is within the remit of the Review Body, under the practice of successive Governments, to publish what it considers to be comparable rates of pay. Anyone can then take those figures and see whether unemployment pay is better. Of course, unemployment pay and supplementary benefits depend on family circumstances, while military salaries, like all others, including the salaries of hon. Members, are unrelated to the marital status of employees.

Mr. Crawshaw: Does not my right hon. Friend agree that, whatever the composition of the Review Body, it is about time that we did something to raise the wages of people serving in the Armed Forces to something commensurate with what other people in the country are getting? Is it right that we should constantly call upon people to serve the country and to do jobs in times of emergency that no one else wishes to do and treat them in the way that we are treating them?

Mr. Mulley: I am obliged to my hon. Friend. I am sure he knows that it is

the Government's desire and intention to restore comparability at the earliest possible time, but it is impossible to speculate on what the recommendations of the Review Body will be or to form a view on them before they are made.

Sir Ian Gilmour: Since both the right hon. Gentleman and the Minister of State have admitted that the Review Body has to abide by Government policy, will the Secretary of State explain why the White Paper virtually ignores the pay of the Armed Forces and why he has not set out the Government's policy to restore comparability of the Armed Forces' pay?

Mr. Mulley: Quite obviously, any White Paper that is published, as the normal procedures of the House require, in February before the end of the financial year cannot take into account the report of a body that is not due to report until March and whose decisions will not be effective until the next financial year. Quite obviously, I could not in the current defence White Paper include anything about the forthcoming pay review.

Sir Ian Gilmour: Is the right hon. Gentleman seriously saying that the White Paper is concerned only with what happens up to March? Of course it relates to the coming year, and he knows that perfectly well.

Mr. Mulley: I know that perfectly well, but I do not think that it would be of any help to anyone if I tried to anticipate what the Pay Review Body would produce in its report next month.

Merchant Shipping (Protection)

Mr. Wall: asked the Secretary of State for Defence what steps he is taking to ensure implementation of the recommendation from the North Atlantic Assembly that the Supreme Allied Commander, Atlantic, be given reinforced authority to plan for protection of vital shipping lanes, in particular in the Southern Atlantic and Indian Oceans.

Mr. Mulley: The NATO Defence Planning Committee authorised SACLANT in 1972 to undertake contingency planning for the protection of allied merchant shipping outside the NATO area in time of tension or war. A plan has been prepared, but it has yet to be approved by NATO.

Mr. Wall: Will the right hon. Gentleman say when the plan is likely to be approved, bearing in mind that it was five years ago that the North Atlantic Treaty Organisation made its recommendation to the Council?

Mr. Mulley: The recommendation, which I think was sponsored by the hon. Gentleman, was made by the Assembly. However, it is much easier to pass resolutions than to give effect to them. A number of member countries of the Alliance have asked for more time to consider these plans. In any event, they could not be published because the whole purpose is to provide contingency plans in time of tension.

Rear-Admiral Morgan-Giles: What is Her Majesty's Government's policy?

Mr. Mulley: I can say that it is not because of any reservations on the part of Her Majesty's Government that the delay has occurred.

Neutron Bomb

Mr. Blaker: asked the Secretary of State for Defence when he next proposes to have consultations with his fellow North Atlantic Treaty Organisation Defence Ministers about the neutron bomb.

Mr. Mulley: I shall next be meeting my colleagues at the NATO meetings in April and May, although not for the specific purpose of discussion the enhanced radiation—reduced blast warhead.

Mr. Blaker: When the Secretary of State next meets his NATO colleagues for a discussion on that subject, will he make the point that the argument that the neutron bomb is especially reprehensible because it kills humans but does not destroy property is untenable in the sense that it would have applied also to the arrow and it could be applied to chemical weapons, which are deployed in large quantities by the Russians? Will the right hon. Gentleman urge the Prime Minister to give a robust reply to Mr. Brezhnev's letter?

Mr. Mulley: It is well known that the original and quite unbelievable publicity with which the so-called neutron bomb was launched was quite indefensible. As the hon. Gentleman said, it is impossible

to have a weapon that will kill people and not destroy property. That, I think, is well understood. However, there are problems about its impact on arms control negotiations, and Her Majesty's Government, like nearly every other NATO country, have not formed a final view. I cannot predict when that final view will be taken within the Alliance.

Mr. James Lamond: Does my right hon. Friend agree that to deploy the neutron bomb in Western Europe must lower the threshold of nuclear war? Does he accept that President Brezhnev was in earnest when he said in the Kremlin on 2nd November—[HON. MEMBERS: "Were you there?"]—that the Soviet Union would develop similar weapons, at enormous cost, if the neutron bomb were placed in Western Europe? That would be a cost that neither the Warsaw Pact nor NATO could afford and would serve only unnecessarily to increase the enormous arms expenditure of the world.

Mr. Mulley: I take my hon. Friend's point that there has been argument about whether the increased military capability of the bomb for the purpose, for example, of attacking tank formations would lead to its being used more readily and, therefore, lower the threshold. That is a serious point and is one of the matters that we are taking into consideration. If it should happen—I cannot predict what the final NATO decision will be—that the neutron bomb is brought in, it would be important not in any way to relax political control over the use of nuclear weapons.

Queen's Flight

Mr. Stoddart: asked the Secretary of State for Defence what is the cost to the Defence Vote of the Queen's Flight.

Mr. Wellbeloved: The current estimated cost to the Defence Vote of the Queen's Flight is £1,800,000 a year.

Mr. Stoddart: Does the Queen's Flight add anything to our defence capability? If it does not, would it not be fairer if the expense of this service were added to another Department's Vote or added to the Civil List?

Mr. Wellbeloved: The composition of the Civil List is not for me but for my right hon. Friend the Prime Minister.


As for the war-time role of the Queen's Flight, it is scheduled to provide communications flying within the United Kingdom for emergency tasks. I am satisfied that it would have a meaningful wartime role.

Mr. Biggs-Davison: What is the proportion of the use of the Queen's Flight by the Royal Family and the use by Her Majesty's Ministers and other subordinates of the Crown?

Mr. Wellbeloved: As the hon. Gentleman no doubt knows, under a longstanding agreement which has been operated by successive Governments certain named Ministers have the right to use the Queen's Flight.

Mr. Churchill: Name them.

Mr. Wellbeloved: They include the Prime Minister and a great many others, including my right hon. Friend the Secretary of State for Defence.

RAF Personnel (Allowances)

Mr. Ernest G. Perry: asked the Secretary of State for Defence if he will list the various allowances available to personnel serving in the Royal Air Force.

Mr. Wellbeloved: I refer my hon. Friend to the reply given to the hon. Member for Harrogate (Mr. Banks) by my right hon. Friend the Minister of State, Ministry of Defence on 25th January 1978. I will also write to my hon. Friend giving details of the rates of allowances currently payable to members of the Royal Air Force.

Mr. Perry: I thank my hon. Friend for that forthright reply. Will he assure me that the allowances that are made available to the Royal Air Force are commensurate with those made available to the other two Services? Are they reviewed periodically to combat inflation?

Mr. Wellbeloved: By and large, the allowances are similar between the three Armed Forces. I am quite sure that the Armed Forces would bring to Ministers' attention any request for consideration of a review of the allowances. If it is helpful to my hon. Friend, I am prepared to place in the Library the full details of all the allowances that are made.

Mr. Nicholas Winterton: Does the hon. Gentleman agree that, while rates of allowances are important for members of the Armed Services, rates of pay are even more important? Does he accept that the first priority of any Government must be to defend the country from external aggression and that, therefore, our Armed Services should be treated as the No. 1 priority? Will he give an assurance to the House that the recommendations of the Pay Review Body, when published, will be implemented in full by the Government?

Mr. Wellbeloved: The first priority of any Government is to ensure that the nation has the economic base upon which it can sustain the life of the people. I would welcome the support of the hon. Gentleman and many of his hon. Friends for the sensible and successful policies of the Government in restoring economic wealth and stability to the country.

Mr. Frank Allaun: Will my hon. Friend note that Labour Members who opposed yesterday's arms expenditure increase bill nevertheless believe that Service men should not be denied decent pay and conditions? Instead, the cuts should take place in research and development, for example, which is costing £900 million a year.

Mr. Wellbeloved: I always appreciate my hon. Friend's support in any defence matter. I welcome his concern for the pay and conditions of the Armed Forces. In my conversations with serving Service men, it is clear that as well as decent pay and adequate conditions they want modern weapons with which to fulfil their job.

Mr. Churchill: Will the hon. Gentleman tell the House why officers of the Royal Air Force are being refused permission to apply for premature voluntary retirement for up to eight years? Will he explain why the standards of intake are having to be lowered?

Mr. Wellbeloved: No officer is refused permission to apply for premature voluntary retirement. Some of those who apply—they are considered under the well-established rules for the granting of premature voluntary retirement—find that they have to fulfil the criterion of amortising the cost of their training. Secondly—I am sure that the hon. Gentleman


would like to give responsible support in this respect—the Armed Forces have a requirement to ensure that those who sign on for a specific period do not exercise the concession of premature voluntary retirement if that means a lessening of the operational ability of the Royal Air Force.

United States Air Force Bases

Mr. Michael McNair-Wilson: asked the Secretary of State for Defence what requests he has received from the United States authorities for the bringing into full operational use of Royal Air Force bases currently kept on a standby basis.

Mr. Wellbeloved: As I told the hon. Member in my letter of 3rd February, the United States authorities have requested the agreement of Her Majesty's Government to the use of RAF Greenham Common as a peace-time base for up to 15 KC-135 tanker aircraft. This request is being carefully considered.

Mr. McNair-Wilson: Is the Minister aware of the highly populated state of the area around RAF Greenham Common? Does he agree that, were the base to become operational, it would bring intolerable noise to thousands of people and genuine anxiety about an air crash? Will he ask the United States authorities to look for alternative bases in less populous areas?

Mr. Wellbeloved: No decision has been taken about the reactivation of Greenham Common. As I said, we are considering the whole subject. In that consideration we are taking into account the possibility of alternatives to Greenham Common. We are anxious that the United States should, with us, continue to provide sufficient forces forward in the European area to act as a meaningful deterrent against an aggressor. I am sure that that is in the interests of those who live around Greenham Common as much as of those who live anywhere else.

Mr. Stoddart: As I contested the Newbury constituency on two occasions—unsuccessfully, I may say—I know that when the base was operational it caused a great deal of trouble and nuisance to residents in the Newbury area. I feel sure that my hon. Friend will want to look very closely at any proposals to reopen

the base and that he will take account of the views of people living in Newbury.

Mr. Wellbeloved: I join my hon. Friends in regretting that my hon. Friend the Member for Swindon (Mr. Stoddart) did not join us on an earlier occasion. We are carefully considering this application because it raises a considerable number of important issues. I am quite certain, however, that, if we have to strike a balance between the noise that will be generated by friendly aircraft and the noise and destruction that would be generated by hostile aircraft, the balance of judgment lies in providing proper facilities for the defence of freedom.

Mr. McNair-Wilson: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise the matter on the Adjournment at the earliest possible date.

Trade Unionism

Miss Richardson: asked the Secretary of State for Defence what access he permits trade union representatives to Service men for the purpose of enlisting them in trade unions.

Mr. Skinner: asked the Secretary of State for Defence what access he permits trade union representatives to Service men for the purpose of enlisting them in trade unions.

Mr. Mulley: As an aid to resettlement, we have entered into agreements with a considerable number of trade unions whereby Service personnel are eligible for direct admission to membership of the relevant union. Details of these agreements, together with advice on how to contact the appropriate trade union officials, are given in a number of Service publications.

Miss Richardson: Does that mean that trade union representatives have access to members of the Armed Forces in terms of recruiting—that is, before they become members of a trade union? Does my right hon. Friend agree that his Department and the Armed Services might benefit from a study of Western European countries in which trade unionism is accepted as a right without any loss of security or discipline?

Mr. Mulley: I am aware of the publication of the Assembly of the Western European Union of 1974, I think it was. The practice in NATO countries is varied. In a very few instances are there any unions in the Armed Forces of a kind that fulfil the functions that my hon. Friend would recognise as the bona fide activities of trade unions.

Mr. Skinner: Will my right hon. Friend enlist the support of ACAS in this matter? Does he agree that trade union involvement throughout industry has meant an improvement in safety techniques and methods employed by management as well as the workers concerned? Should that not apply to the Army? It the Common Market issues a directive on the matter, will he follow it?

Mr. Mulley: I shall await with great interest any such Common Market directive. I wonder whether, if I were to follow such a directive, I should have the support of my hon. Friend, who is notorious for his full support of the Common Market. I recognise the tremendous job that trade unions have done in industry. However, there would be substantial difficulties in having exactly the same pay and disciplinary negotiating rights within the Armed Forces as in civilian employment, for a number of reasons. I will spell them out for my hon. Friend at some other time, if he wishes.

Mrs. Knight: Does the Secretary of State agree that defending British citizens against their enemies is the first duty of any Government and that to take any steps that could lead to politically motivated strikes within the Armed Forces, as, according to the ex-Leader of the Labour Party, happens in industry, would be to renege on this duty to our people?

Mr. Mulley: I assure the hon. Lady that none of Her Majesty's Forces is anxious to go on strike, whether politically motivated or otherwise. I do not think that that is a likely consequences that the hon. Lady should lie awake and worry about.

Oral Answers to Questions — NORTH ATLANTIC COUNCIL

Mr. George Rodgers: asked the Prime Minister when he next expects to attend a meeting of the North Atlantic Council.

The Prime Minister (Mr. James Callaghan): I expect to attend the meeting of the North Atlantic Council in Washington on 30th and 31st May.

Mr. Rodgers: If my right hon. Friend attends such a meeting, will he convey the revulsion of ordinary decent people in this country at the suggestion that the neutron or enriched radiation bomb should become part of the armoury of NATO? Will he advocate that this gruesome weapon, which apparently has the capacity to destroy people yet leave property intact, should be outlawed and denounced by both Western and Eastern power blocs?

The Prime Minister: The neutron bomb is a weapon fearful in its use, but it is no more fearful than a number of weapons now being developed by the Soviet Union, including, for example, the SS20. Therefore, I do not think that we should tackle this matter from the point of view of a single weapon. It is important that the world Disarmament Conference, which is to assemble at the United Nations in New York, should take a broad view of the whole of this problem. I propose to attend that conference on 2nd June and to make a speech on the need for disarmament and on the manner in which it should be tackled.

Rear-Admiral Morgan-Giles: When the Prime Minister meets his NATO colleagues, will he feel able to speak with pride about Britain's Armed Forces? [HON. MEMBERS: "Yes."] If so, will he take his miserable little Secretary of State by the scruff of the neck—[HON. MEMBERS: "Withdraw."]—and get him to do something about Armed Forces pay now—chop, chop?

The Prime Minister: The answer to the first part of the question is "Yes, Sir, on all occasions." As regards the second part of the question, what the hon. and gallant Member said may not be out of order, but I hope that you, Mr. Speaker, will indicate that you do not regard it as in very good taste.

Mr. Crawshaw: Does the Prime Minister realise that what he said today will appeal to those who are interested in the defence of the country? Does he agree that, whereas for 33 years this country has lived in peace under the threat of the atomic bomb, it may be


that the neutron bomb will provide such terror that war will be abolished from the face of the word for ever?

The Prime Minister: The neutron bomb and its serious effects are now being used by the Soviet Union as a propaganda cover to prevent discussion of some of the other serious weapons being developed. I want to ensure that this is on the record. Mr. Brezhnev can help in this matter if, instead of focusing propaganda on the neutron bomb, he will enter into serious discussions at the United Nations or elsewhere on how we are to deal with some of the other weapons that are now being developed and on which research is taking place. There is a formidable prospect facing the world on this particular matter. I do not want to see the world destroyed by our terror. Nor do I want us to succumb to blackmail by someone else's terror. It is in that spirit that I think we must approach this matter.
On 1st February the United Kingdom submitted a draft programme of action to the United Nations which called for the following: first, to curb the accumulation and development of nuclear weapons by international agreement; secondly, to agree on a treaty to assure the world that those who renounce the nuclear weapon will not have it used against them; thirdly, to extend confidence-building measures which are in operation in Europe to other parts of the world fourthly, to arrive at a comprehensive test ban treaty as quickly as possible. This is the kind of programme that I want to put forward as quickly as possible.

Mr. Churchill: What discussions have Ministers had with the Soviet Government about the recent development of the mobile intermediate-range SS20 missile, which has a destructive potential literally thousands of times greater than the theatre nuclear neutron bomb?

The Prime Minister: For once I find myself in agreement with the hon. Member for Stretford (Mr. Churchill). The SS20 is a more dangerous weapon than the neutron bomb. That is why I do not want to focus attention on a single weapon. There are weapons on both sides that must enter into a comprehensive disarmament discussion.

Rear-Admiral Morgan-Giles: On a point of order, Mr. Speaker. May I, through you, explain that I meant nothing personal a moment ago in my reference to the Secretary of State for Defence? I wish, however, to draw an important point to the attention of the Prime Minister—

Mr. Speaker: Order. The House will have heard the hon. and gallant Gentleman's explanation.

Oral Answers to Questions — TUC

Mr. Rifkind: asked the Prime Minister when he last met the General Secretary of the Trades Union Congress.

The Prime Minister: I met representatives of the TUC, including the General Secretary, when I took the chair at a meeting of NEDC on 1st February.

Mr. Rifkind: Does the Prime Minister still endorse the recipe for political success that he once gave to Lord Wigg—namely, to wait until the trade unions decide their line and then follow it? Has the Prime Minister said to Mr. Moss Evans, who yesterday gave his support to collective bargaining, that in his view we have free collective bargaining at present?

The Prime Minister: I do not think that the trade unions believe that I always and universally follow their view. I believe that the partnership between the trade union movement and the Government of the day in this complex industrial society is the best way to govern Britain. That has been proved by results in the last four years.

Mr. Heffer: Does the Prime Minister recall that he also met the General Secretary of the TUC this morning? Would he like to say something about unemployment? Is it not clear that, although we can welcome the reductions that are taking place, we need further measures to help the construction industry and a boost in the economy really to begin to bring down the unemployment figures?

The Prime Minister: There was an improvement in the employment figures today. It was a welcome improvement of 39,000. There was also an increase in the number of vacancies. However, in this and in such matters as the balance of payments I do not think that we should


make too much of one month's figures. There has been an improvement in the unemployment figures in the last four and possibly five months. The construction industry has suffered, but a substantial boost has been given to it by increased financial assistance. Apart from that, I think that we had better await the Budget on 11th April.

Mrs. Thatcher: Can the Prime Minister account for the fact that unemployment is still worse here than in any of the major industrial competitor countries?

The Prime Minister: That is not, of course, totally true. I have looked at the situation. I could give exceptions. What is true is that the United Kingdom unemployment since the war—I was looking at these figures this morning—has been consistently higher than that of the Federal Republic of Germany or of France, for deep-seated reasons which we have discussed in the House. It is now our task to improve that situation. If the right hon. Lady looks over the range of years at the worsening that has taken place since 1973, she will find that the United Kingdom position has in no sense become relatively worse. It has not become relatively worse than that of our major competitors.

Mrs. Thatcher: When one calculates these figures on a comparable basis—they are given in that way in OECD figures and in Hansard—unemployment is worse here than in the United States, France, West Germany and Italy. Surely that is a great reflection on the Government, but the Prime Minister seems to have no proposals to put it right.

The Prime Minister: The right hon. Lady is not right again. I have gone into the figures with some considerable care. What she overlooks are the very great manpower measures which have been undertaken by the Government and which have saved the jobs of several hundred thousand people. It is a record of which no other country can boast.
On the general situation, the Leader of the Opposition agreed that inflation was the biggest single evil to overcome. That was in the Conservatives' last manifesto. We believe that that is so. We are now overcoming it. It is now in single figures and will continue in single figures for a long time to come. That

will enable us to build a healthy economy again.
I do not disguise the present situation. The people want to know the truth. They know that in a world recession, with nearly 17 million people out of work in the OECD countries, the situation will become worse this year unless there is a faster rate of growth in the Western industrialised countries. We depend upon that rate of growth for our exports to increase and for jobs to be found.

Mrs. Thatcher: The Prime Minister still avoids the point. Under identical world circumstances, our competitors have done better than this Government. How does the Prime Minister account for that?

The Prime Minister: Under identical circumstances, no other Government were left with a money supply that was increasing at a rate of 28 per cent. The right hon. Lady should be ashamed of having been a member of a Government which allowed inflation to roar away in the manner that it did.
We have now repaired the damage that the right hon. Lady did. We shall go on repairing it. We shall ensure that the rate of inflation does not in any way approach what it was when the Conservatives left office. [HON. MEMBERS: "8·4 per cent. 8·4 per cent."] There used to be a case for individual heckling, but the mindless chant has not only destroyed public meetings but it tends to make it impossible to reply to questions. I shall continue for a moment. I want to make it clear that the inflation rate is going down lower than it was when the Conservatives were in office. It will remain that way. Exports are increasing faster than when the Conservatives were in office. We are now rebuilding the financial stability of the country and trying to get it back on course. The Conservatives left us in sheer despair in 1973.

Oral Answers to Questions — PRIME MINISTER (ENGAGEMENTS)

Mr. Pattie: asked the Prime Minister whether he will list his official engagements for 21st February.

The Prime Minister: In addition to my duties in this House, I shall be holding


meetings with ministerial colleagues and others. This evening I hope to have an audience of Her Majesty the Queen.

Mr. Pattie: Will the Prime Minister take time to reflect today that our economic well-being depends vitally upon our ability to compete in world markets? Further, is he aware, in spite of what he said on the question of our having higher unemployment in this country than is suffered by our competitors around the world, that productivity in this country is static and that output has not yet reached the level achieved in 1973? Why is he so self-satisfied about this, and what is he doing about it?

The Prime Minister: The hon. Member is only repeating points that I have made time after time from this Dispatch Box, without always commanding full support from the Conservatives. I am glad to see that the hon. Member has not returned to the charge he made in The Times this morning about the remarkable duplicity of the Defence Estimates.

Mr. Clemitson: Will my right hon. Friend take time to point out to the Leader of the Opposition that, whereas employment in this country is as high today as it was at the beginning of the decade, in Germany there has been a loss of well over 1·5 million jobs?

The Prime Minister: That is true, and it is also true that the Opposition have consistently voted against all the measures that the Government have introduced to save jobs, whether that be in the motor car industry, in the shipbuilding industry or elsewhere. On the manufacturing side, there are more people at work today in Britain than there were a year ago. This number will continue to increase. In common with other Western countries, we are facing a substantial short-term increase in the number of young people reaching the age of 15 or 16. This situation will last for two or three years and will be followed by a substantial decline. Therefore, far more people will be coming on to the employment register seeking work for many years.

Several Hon. Members: rose—

Mr. Speaker: Order. We must now move on. I allowed extra time because we were a minute late in starting Prime Minister's Questions.

Oral Answers to Questions — HONOURABLE MEMBERS (RULES OF BEHAVIOUR)

Mr. Faulds: On a point of order, Mr. Speaker. Far be it from me to leap to the defence of the hon. Member for Bolsover (Mr. Skinner), but during his supplementary question to my right hon. Friend the Secretary of State for Defence four of our colleagues tripped or scurried into the Chamber. I recall that there used to be a tradition that when hon. Members were asking questions or when Ministers were answering them, other hon. Members did not break their line of contact, visual or verbal. Can you occasionally draw that requirement to the notice of the House?

Mr. Speaker: I have noticed that the hon. Member for Warley, East (Mr. Faulds) strictly observes this rule himself and it is one of the long-established courtesies of this House that no one intervenes between an hon. Member who is speaking and the occupant of the Chair.

Mr. Arthur Lewis: Further to that point of order, Mr. Speaker. Perhaps I misheard you or perhaps you unintentionally gave the wrong ruling. Surely the custom is that one does not pass between the person who has the Floor and Mr. Speaker or the person in the Chair. If that is what you said, I am happy to let the matter pass.

Mr. Speaker: Order. I could not wish for confirmation from a better source.

BILL PRESENTED

SEA FISH (CONSERVATION) (AMENDMENT)

Sir John Gilmour presented a Bill to extend in relation to waters adjacent to Scotland the purposes for which orders may be made under the Sea Fish (Conservation) Act 1967 for regulating the use of nets and other fishing gear and to include salmon and migratory trout among the species of sea fish in respect of which such orders may be made; And the same was read the First time; and ordered to be read a Second time upon Friday and to be printed.

ABORTION (AMENDMENT)

3.35 p.m.

Sir Bernard Braine: I beg to move,
That leave be given to bring in a Bill to make further provision with respect to the protection of the life of a viable foetus; to amend section 4 of the Abortion Act 1967; to regulate the provision of payment for consultation and advice in relation to the termination of pregnancy; and to make provision with respect to bodies corporate.
I rise to ask leave to introduce this short Bill to amend the Abortion Act 1967 by implementing three of the most important recommendations of the Select Committee of this House appointed in February 1975. In so doing I am providing the House with an opportunity to assert its will in a manner of major social and parliamentary importance.
As hon. Members know, on every occasion that the issue of abortion law has been raised in recent years a majority has signified its wish for the law to be clarified and amended, only to find itself frustrated by procedural or other considerations. That is no way to deal with so grave a matter. Yet it is natural enough for all hon. Members in their hearts to wish to still the controversy which continues to surround this subject. The modest measure I now propose is advanced sincerely with that wish in mind.
The House will recall that the Bill introduced by the hon. Member for Glasgow, Pollok (Mr. White) was given a Second Reading on 7th February 1975 by a substantial majority. It will recall, too, that in that debate the right hon. Member for Plymouth, Devonport (Dr. Owen), who was then the Minister of State for Health, defended the Government's proposal to refer the Bill to a Select Committee on the ground that this was the best way to make progress in "a difficult area". The House will recall his advice that the Bill might be delayed if left to the normal procedure and was likely to reach the statute book more quickly if it were to go to a Select Committee.
The House agreed with him, and the Select Committee was set up. But while the Government accepted its interim recommendations for administrative action in October 1975, they failed to do

anything about the recommendation for legislation which the Committee, reestablished in the next Session by yet another overwhelming vote, made in its report in July 1976. In its report the Committee asserted that it was
six years since the Lane Committee was set up. It was invited to recommend changes in the law and it did so. To allay the disquiet which occasioned its appointment, and to fulfil the expectations of Government action which accompanied the publication of the Lane Report, we believe that the Government is under an obligation to introduce legislation without delay. We … therefore, recommend that legislation to implement this Report be introduced by the Government forthwith.
That report and a later one dealing with research into the after effects of abortion and the question of conscientious objection were both ignored by the Government. The House gave its answer to that by giving a Second Reading on 25th February last year to a Bill introduced by my hon. Friend the Member for Buckingham (Mr. Benyon). That Bill sought to introduce most of the recommendations of the Select Committee and it completed its Committee stage last July. But no further time was made available for it, despite the view of many of us that the Government were morally committed to providing time.
The House may care to reflect on the fact that New Zealand, a country which pioneered enlightened health and social legislation, set up a Royal Commission dealing with abortion which has been strongly influenced by the work of our own Select Committee. It is ironic, is it not, Mr. Speaker, that the New Zealand Royal Commission has just proposed the adoption of a number of recommendations of our Select Committee, although these have not been implemented here?
I turn briefly to my proposed Bill. I wish to make it plain that it will not interfere in any way with the criteria for lawful abortion laid down in the 1967 Act. It is limited solely to three important matters of principle.
The first concerns the upper time limit for abortions. It is now widely accepted in all civilised countries that abortion should not be lawful after the stage when a child may be viable, that is, capable of [...] outside the womb. In this country the upper limit is 28 weeks as a result of a presumption in the Infant Life (Preservation) Act 1929.
Sir John Peel, former President of the Royal College of Obstetricians and Gynaecologists, told the Select Committee that within recent years there were quite a number of well-documented cases where a foetus of less than 28 weeks had survived, two within his personal experience.
The Lane Committee recommended a 24-week limit, but the BMA told the Lane Committee and the Select Committee that it favoured a 20-week limit. In its comments on the Lane Report it said:
even with the reduction from 28 to 24 weeks … the position still exists that owing to an error in the calculation of date a foetus intended for destruction could be born alive and be capable of functioning as a self-sustaining whole independent of any connection with the mother.
The report of the Peel Advisory Group also recommended that 20 weeks should be regarded as prima facie proof of viability. Sir Stanley Clayton, then President of the Royal College, advocated a 20-week limit when he appeared before the Committee, but rightly said that there should be a safeguard in situations of medical risk of abnormality in the child, in which case later abortions should be permitted.
A Gallup Poll last year among gynaecologists showed 87 per cent. in favour of a 20-week limit or less. My Bill will reflect these views. In short, it will end the destruction of a baby capable of survival under 28 weeks.
The second purpose of the Bill is to strengthen and clarify the provision in Section 4 of the 1967 Act regarding conscientious objection to taking part in an abortion. My object here is to ensure that the original intentions of the 1967 Act are clearly understood and respected. They are not clearly understood and respected at present.
The Select Committee received evidence that in particular some nurses were distressed by having to take part in abortions, and that while the position of Catholic nurses was well understood, that of non-Catholic nurses sometimes was not. The Royal College of Nursing indicated in evidence to the Select Committee its concern over the problem.
The Select Committee also considered that the proviso in the 1967 Act that the burden of proof of conscientious objection should rest on the person claiming to

rely on it was ureasonable. My Bill will give statutory clarification of the grounds on which conscientious objection can be based. This is essential, in my view, if nursing is to continue to attract and to hold young people of a caring and dedicated nature.
The third purpose of my Bill is to require that all pregnancy advisory bureaux which charge fees should be licensed by the Secretary of State, as proposed by the Lane Committee. A condition of licensing should be that these bureaux must have no financial connections with abortion clinics. This was recommended by the Select Committee in view of the evidence it received about financial abuses and the importance placed by many witnesses on unbiased counselling.
The Department of Health and Social Security gave the Select Committee a list of financial links between abortion clinics and pregnancy advisory bureaux. I give just two examples. First, the directors of the company running the Metropolitan Pregnancy Control Centre are also the directors of the Raleigh Nursing Home. Therefore, any woman who goes to the centre and after counselling decides to go on with her pregnancy is likely to represent a loss of profit to the directors.
Secondly, the Pregnancy Advisory Service is a registered charity which has a business arrangement with the Fairfield Nursing Home in return for its exclusive use of the home for its patients, half the profits being remitted to the PAS. Therefore, every woman referred to the nursing home after counselling by the PAS means more money for that organisation. Significantly, in 1975, 90 per cent. of the women counselled by PAS were referred for abortion.
The Select Committee considered that such obvious conflicts of interest were clearly undesirable and recommended against exemption from the severance requirement for charities.
Until such time as the National Health Service can provide proper facilities for all lawful abortions—and that is what should happen—my sponsors and I would be prepared to consider exemption for bona fide charities, provided, first, that there were regulations to ensure that abortion on request, which was never intended by the 1967 Act, did not take place, and,


secondly, that there was ultimate parliamentary control permitting revocation of a licence.
I am, of course, aware that unless the Government provide time for my Bill, if the House gives me leave to introduce it, it is unlikely to make progress. My purpose today, therefore, is to give the House an opportunity to reassert its will with regard to amending the 1967 Act and to persuade the Government to provide the necessary time.
But the Bill is an opportunity for something more. While on both flanks of this controversy there will always be those who believe that no abortion should be available, save where the mother's life is at risk, and those who believe that abortion should be available on demand, the overwhelming majority of people want a middle way conducted responsibly within a framework of humane law. I believe that my Bill will help to strengthen that framework.

3.46 p.m.

Sir George Sinclair: rose—

Mr. Speaker: Is the hon. Gentleman rising to oppose the Bill?

Sir G. Sinclair: Yes, Mr. Speaker.
I oppose the motion, because it would pave the way for a Bill to restrict the operation of the 1967 Act, and because it is in the teeth of medical opinion.
I supported the Bill that preceded the 1967 Act throughout its Committee stage, and I have since defended the Act whenever it has come under attack. The purpose of the motion is to serve as the opening shot in a public campaign to put pressure on the Government to give time on the Floor of the House for a restrictive amendment of the 1967 Act.
I greatly respect my hon. Friend the Member for Essex, South-East (Sir B. Braine) and his right to his strong views on this subject, made clear over many years. But I beg leave to dispute the claim that he is not opposed to the Act and that he is, as it were, the moderate man in the middle.
In 1967, my hon. Friend opposed the Third Reading of the Bill. In 1976 he is reported in his local Press to have spoken of
the wanton killing of unborn infants",

thus using the emotive language of the anti-abortion organisation, the Society for the Protection of Unborn Children, whose rally he was attending. My hon. Friend has consistently supported attempts to restrict and disrupt the work of the two charities, the British Pregnancy Advisory Service and the Pregnancy Advisory Service—of which more in a moment.
I should like to deal shortly with three main aims of the Bill so far as I can judge them, in the absence of any text from the Press reports and statements by my hon. Friend.
I begin with the time limit. It is only in the most exceptional cases that abortions after 20 weeks of pregnancy are sanctioned. Eighty per cent. are performed before the twelfth week and 99 per cent. before the twentieth week Whilst arguments are being advanced for reducing the upper limit below the 28 weeks fixed by the Infant Life (Preservation) Act 1929, we believe that consideration must be given to those women who find, from foetal diagnosis late in pregnancy, that their child will be born with a congenital deformity and who will wish to have the opportunity of deciding whether to continue that particular pregnancy.
Before legislation is embarked upon to fix a lower limit, it would be as well to wait and see what further advances may be made in pre-natal diagnosis, which will have a bearing on the upper limit for abortion.
There is another important factor. Until, in certain areas, the restrictions of the abortion service under the NHS are removed, and with them the risk of delay, it would, in my view, be too soon to change the existing time limit.
There is no need for new legislation. The exceptional cases over 20 weeks are permitted only where there is dire need and on medical judgment. The law must leave some room for medical judgment by those who are responsible for dealing with these problems as part of their day-to-day work. The medical profession itself can see no reason for a change at this stage.
As to conscience, the 1967 Act gives rights of conscience in this matter to the medical profession. My hon. Friend seeks to widen that conscience clause. Here I shall make only this point. My hon. Friend wishes, against medical opinion,


to extend the rights of conscience, but he says nothing of extending the rights of women in distress to know whether they are being refused a termination by a doctor, not on medical grounds but because of his conscientious objection to abortion. Surely women in such cases have a right to know such grounds and a right to be advised to seek another doctor who will be prepared to advise not on his personal conscience but on medical grounds. There is a special difficulty when the only consultant available in an area refuses an abortion on grounds of conscience. Dangerous delays can follow. I repeat: the representative organisations of the medical profession see no need for a change.
The most important practical effect of the Bill, however, so far as we can judge its intentions, would be to hinder the operations of the two charitable agencies, the British Pregnancy Advisory Service and the Pregnancy Advisory Service, London. These have grown up to provide a service under the Act in areas in which either the National Health Service has not yet developed its own services for women needing an abortion or such a service has been denied by local consultants. To disrupt the services of these two charities would once again drive women in such areas to back street abortions.
Fears about abuses, expressed three years ago, have been dispelled, either be because the administrative controls imposed by the DHSS have been improved and more widely publicised, or as a result of investigations revealing that there was no truth in the allegations in the first place. The most notorious of these were contained in the book "Babies for Burning", which shocked the public and shocked Parliament. The authors have since withdrawn their allegations and imputations against the BPAS in a statement in open court on 18th January this year. They
apologise for any distress and damage
which their allegations have caused and
recognise that BPAS exercises the greatest care in the employment of qualified medical practitioners, and in selecting and training its counsellors.
The two charities were set up initially to help women in certain areas where senior medical staff made clear their objections to legal powers for other than

strictly medical reasons. This attitude has meant that women have far more chance of obtaining an NHS abortion in some parts of the country than in others. For example, in Hartlepool 96 per cent. of the women who have abortions obtain them through the National Health Service, while in Wolverhampton only 7 per cent. have National Health Service abortions. The charitable services exist to level out this imbalance.
When the British Pregnancy Advisory Service and the Pregnancy Advisory Service were set up in 1968, their founders hoped that the need for their services would be short-lived. But 10 years later 50 per cent. of abortions are still having to be carried out in the private sector. Wrecking the charitable services can only lead to the exploitation on a grand scale of women who would be forced to resort to back street abortions, pay large fees or be compelled to continue with an unwanted pregnancy.
The sponsor of the motion said over the radio this morning:
My view is that all abortions ought to be caried out within the NHS.
So do the two charitable organisations which I have just described. But it would, in my judgment, be wrong to disrupt their work until the needs of women for abortion under the law can be fully met by the NHS.
We should, I believe, listen to what the British Medical Association has to say—and on other matters in the past, and publicly, the sponsor of the motion has paid great regard to that body. At its annual conference in July 1977, the BMA voted against any amendment of the 1967 Act. In a letter dated 17th February 1978 about the motion that we are now debating, the British Medical Association reaffirmed that view. It stated:
We do not, therefore, see the necessity for a further amendment Bill as now proposed.
I hope, Mr. Speaker, that in view of this medical opinion and the need of women in distress, the motion will be given very little support.

Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and Nomination of Select Committees at Commencement of Public Business):—

The House divided: Ayes 181, Noes 175.

Division No. 120]
AYES
[3.56 p.m.


Abse, Leo
Harrison, Rt Hon Walter
Oakes, Gordon


Alison, Michael
Hastings, Stephen
O'Halloran, Michael


Atkins, Rt Hon H. (Spelthorne)
Hawkins, Paul
Onslow, Cranley


Atkins, Ronald (Preston N)
Hayhoe, Barney
Oppenheim, Mrs Sally


Atkinson, David (Bournemouth, East)
Higgins, Terence L.
Page, John (Harrow West)


Bain, Mrs Margaret
Holland, Phillip
Page, Richard (Workington)


Banks, Robert
Hordern, Peter
Parkinson, Cecil


Beith, A. J.
Hunt, David (Wirral)
Parry, Robert


Bennett, Sir Frederic (Torbay)
Hunter, Adam
Penhaligon, David


Benyon, W.
Hurd, Douglas
Powell, Rt Hon J. Enoch


Berry, Hon Anthony
Hutchison, Michael Clark
Price, David (Eastleigh)


Biggs-Davison, John
Irving, Charles (Cheltenham)
Pym, Rt Hon Francis


Blaker, Peter
Jessel, Toby
Rees, Peter (Dover &amp; Deal)


Bowden, A. (Brighton, Kemptown)
Johnson Smith, G. (E Grinstead)
Rhys Williams, Sir Brandon


Boyson, Dr Rhodes (Brent)
Jones, Arthur (Daventry)
Rifkind, Malcolm


Braine, Sir Bernard
Jones, Dan (Burnley)
Roberts, Michael (Cardiff NW)


Bray, Dr Jeremy
Joseph, Rt Hon Sir Keith
Robertson, John (Paisley)


Brotherton, Michael
Kellett-Bowman, Mrs Elaine
Ross, Rt Hon W. (Kilmarnock)


Brown, Sir Edward (Bath)
Kershaw, Anthony
Rossi, Hugh (Hornsey)


Buchanan, Richard
Kimball, Marcus
St. John-Stevas, Norman


Butler, Adam (Bosworth)
King, Tom (Bridgwater)
Sandelson, Neville


Callaghan, Jim (Middleton &amp; P)
Kitson, Sir Timothy
Shelton, William (Streatham)


Canavan, Dennis
Knight, Mrs Jill
Shersby, Michael


Carter-Jones, Lewis
Lambie, David
Sillars, James


Churchill, W. S.
Lamond, James
Sims, Roger


Clark, Alan (Plymouth, Sutton)
Latham, Michael (Melton)
Skeet, T. H. H.


Clark, William (Croydon S)
Lawrence, Ivan
Smith, Cyril (Rochdale)


Clegg, Walter
Le Marchant, Spencer
Smith, Dudley (Warwick)


Clemitson, Ivor
Lewis, Ron (Carlisle)
Smith, John (N Lanarkshire)


Cocks, Rt Hon Michael (Bristol S)
Lomas, Kenneth
Speed, Keith


Cohen, Stanley
Luce, Richard
Stainton, Keith


Coleman, Donald
Mabon, Rt Hon Dr J. Dickson
Stanbrook, Ivor


Cope, John
McAdden, Sir Stephen
Steen, Anthony (Wavertree)


Craigen, Jim (Maryhill)
McCartney, Hugh
Stewart, Rt Hon Donald


Dalyell, Tam
MacCormick, Iain
Stewart, Ian (Hitchin)


Dempsey, James
McCrindle, Robert
Stokes, John


Doig, Peter
McElhone, Frank
Stott, Roger


Douglas-Hamilton, Lord James
Macfarlane, Neil
Stradling Thomas, J.


Duffy, A. E. P.
Mackenzie, Rt Hon Gregor
Taylor, R. (Croydon NW)


Eadie, Alex
McMillan, Tom (Glasgow C)
Taylor, Teddy (Cathcart)


Elliott, Sir William
McNair-Wilson, M. (Newbury)
Tinn, James


English, Michael
McNamara, Kevin
Urwin, T. W.


Eyre, Reginald
Maguire, Frank (Fermanagh)
Wainwright, Edwin (Dearne V)


Fell, Anthony
Marshall, Dr Edmund (Goole)
Wakeham, John


Fitch, Alan (Wigan)
Marshall, Michael (Arundel)
Walder, David (Clitheroe)


Fowler, Norman (Sutton C'f'd)
Mather, Carol
Walker, Terry (Kingswood)


Fox, Marcus
Mawby, Ray
Wall, Patrick


Fraser, Rt Hon H. (Stafford &amp; St)
Meyer, Sir Anthony
Weatherill, Bernard


Fry, Peter
Miscampbell, Norman
Wells, John


Gilmour, Sir John (East Fife)
Mitchell, David (Basingstoke)
Welsh, Andrew


Ginsburg, David
Moate, Roger
White, James (Pollok)


Glyn, Dr Alan
Molyneaux, James
Whitelaw, Rt Hon William


Goodhew, Victor
Monro, Hector
Wigley, Dafydd


Gourlay, Harry
Montgomery, Fergus
Willey, Rt Hon Frederick


Gower, Sir Raymond (Barry)
More, Jasper (Ludlow)
Wilson, Gordon (Dundee E)


Grant, Anthony (Harrow C)
Morris, Charles R. (Openshaw)
Winterton, Nicholas


Gray, Hamish
Morrison, Hon Peter (Chester)
Younger, Hon George


Grieve, Percy
Mudd, David



Grocott, Bruce
Neave, Airey
TELLERS FOR THE AYES:


Hamilton, James (Bothwell)
Neubert, Michael
Mr. Ian Gow and


Hannam, John
Newton, Tony
Mr. Ian Campbell.


Harrison, Col Sir Harwood (Eye)
Noble, Mike





NOES


Adley, Robert
Bradley, Tom
Cryer, Bob


Allaun, Frank
Brown, Hugh D. (Provan)
Cunningham, G. (Islington S)


Armstrong, Ernest
Buchan, Norman
Davidson, Arthur


Ashton, Joe
Burden, F. A.
Davies, Bryan (Enfield N)


Atkinson, Norman
Carmichael, Neil
Davis, Clinton (Hackney C)


Bagier, Gordon A. T.
Cartwright, John
Deakins, Eric


Baker, Kenneth
Castle, Rt Hon Barbara
Dean, Joseph (Leeds West)


Barnett, Guy (Greenwich)
Colquhoun, Ms Maureen
de Freitas, Rt Hon Sir Geoffrey


Barnett, Rt Hon Joel (Heywood)
Conlan, Bernard
Dormand, J. D.


Bates, Alf
Cook, Robin F. (Edin C)
Douglas-Mann, Bruce


Bean, R. E.
Corbett, Robin
Drayson, Burnaby


Bidwell, Sydney
Crawshaw, Richard
Ellis, John (Brigg &amp; Scun)


Body, Richard
Cronin, John
Ennals, Rt Hon David


Boothroyd, Miss Betty
Crouch, David
Evans, Fred (Caerphilly)


Bottomley, Peter
Crowther, Stan (Rotherham)
Evans, Ioan (Aberdare)







Evans, John (Newton)
Kinnock, Neil
Rodgers, Sir John (Sevenoaks)


Fairbairn, Nicholas
Knox, David
Rooker, J. W.


Fairgrieve, Russell
Lamborn, Harry
Ross, Stephen (Isle of Wight)


Farr, John
Latham, Arthur (Paddington)
Scott, Nicholas


Faulds, Andrew
Lester, Jim (Beeston)
Sedgemore, Brian


Fernyhough, Rt Hon E.
Lestor, Miss Joan (Eton &amp; Slough)
Selby, Harry


Flannery, Martin
Lewis, Arthur (Newham N)
Sever, John


Fletcher, Ted (Darlington)
Litterick, Tom
Shaw, Giles (Pudsey)


Food, Rt Hon Michael
Loyden, Eddie
Sheldon, Rt Hon Robert


Forman, Nigel
McDonald, Dr Oonagh
Short, Mrs Renée (Wolv NE)


Forrester, John
MacFarquhar, Roderick
Silkin, Rt Hon S. C. (Dulwich)


Fowler, Gerald (The Wrekin)
MacGregor, John
Silverman, Julius


Fraser, John (Lambeth, N'w'd)
MacKay, Andrew (Stechford)
Sinclair, Sir George


Freud, Clement
Madden, Max
Skinner, Dennis


Gardiner, George (Reigate)
Mallalieu, J. P. W.
Smith, Timothy John (Ashfield)


Garrett, John (Norwich S)
Marks, Kenneth
Spearing, Nigel


Garrett, W. E. (Wallsend)
Maxwell-Hyslop, Robin
Spriggs, Leslie


George, Bruce
Maynard, Miss Joan
Steel, Rt Hon David


Gilbert, Dr John
Meacher, Michael
Stewart, Rt Hon M. (Fulham)


Gilmour, Rt Hon Ian (Chesham)
Mendelson, John
Stoddart, David


Graham, Ted
Mikardo, Ian
Swain, Thomas


Grant, George (Morpeth)
Miller, Dr. M. S. (E Kilbride)
Taylor, Mrs Ann (Bolton W)


Grant, John (Islington C)
Mitchell, Austin
Temple-Morris, Peter


Grimond, Rt Hon J.
Molloy, William
Thomas, Mike (Newcastle E)


Grist, Ian
Morris, Michael (Northampton S)
Thorne Stan (Preston South)


Hardy, Peter
Morrison, Charles (Devizes)
Tomlinson, John


Harper, Joseph
Moyle, Roland
Townsend, Cyril D.


Hayman, Mrs Helene
Mulley, Rt Hon Frederick
Viggers, Peter


Heffer, Eric S.
Newens, Stanley
Wainwright, Richard (Colne V)


Hooley, Frank
Ogden, Eric
Ward, Michael


Hoyle, Doug (Nelson)
Orbach, Maurice
Watkins, David


Huckfield, Les
Orme, Rt Hon Stanley
Watkinson, John


Hughes, Robert (Aberdeen N)
Palmer, Arthur
Weetch, Ken


Hunt, John (Ravensbourne)
Pardoe, John
Wellbeloved, James


Irving, Rt Hon S. (Dartford)
Parker, John
Whitehead, Phillip


Jackson, Miss Margaret (Lincoln)
Pavitt, Laurie
Whitlock, William


Jeger, Mrs Lena
Perry, Ernest
Wilson, Alexander (Hamilton)


Jenkins, Hugh (Putney)
Price, C. (Lewisham W)
Wilson, William (Coventry SE)


John, Brynmor
Radice, Giles
Wise, Mrs Audrey


Johnson, James (Hull West)
Renton, Rt Hon Sir D. (Hunts)
Young, Sir G. (Ealing, Acton)


Johnson, Walter (Derby S)
Rhodes James, R.



Kelley, Richard
Richardson, Miss Jo
TELLERS FOR THE NOES:


Kerr, Russell
Ridley, Hon Nicholas
Mr. Robin Hodgson and


Kilroy-Silk, Robert
Roderick, Caerwyn
Mrs. Joyce Butler.

Question accordingly agreed to.

Bill ordered to be brought in by Sir Bernard Braine, Mr. Frederick Willey, Mrs. Margaret Bain, Mr. William Benyon, Mr. Leo Abse, Mr. Cyril Smith, Mr. Robert Bradford, Mrs. Elaine Kellett-Bowman, Dr. Jeremy Bray, Mr. James White, Mr. Keith Stainton and Mr. Ian Campbell.

ABORTION (AMENDMENT)

Sir Bernard Braine accordingly presented a Bill to make further provision with respect to the protection of the life of a viable foetus; to amend Section 4 of the Abortion Act 1967; to regulate the provision of payment for consultation and advice in relation to the termination of pregnancy; and to make provision with respect to bodies corporate: And the same was read the First time; and ordered to be read a Second time upon Friday 3rd March and to be printed. [Bill 69.]

Orders of the Day — SUPPLY

[8TH ALLOTTED DAY]—considered

Orders of the Day — TAXATION

4.8 p.m.

Mr. Peter Rees: I beg to move.
That this House condemns Her Majesty's Government for raising excessive amounts in taxation and for doing so in such a way as to penalise hard work, stifle enterprise and increase unemployment; and calls for a substantial and continuing reduction in the burden of direct taxation in preference to an increase in public expenditure.

Mr. Speaker: I have selected the Government amendment.

Mr. Rees: By a fortunate coincidence this debate succeeds by a few days the Chequers conference at which, we are credibly informed, the Government debated their Budget strategy. In due course, perhaps, some latter-day Crossman will tell us precisely what position any particular Member of the Government took up. But for the moment it must be a matter for conjecture. But at least today's debate—[Interruption.] I do not suggest that the Chief Secretary may have been writing beneath the Cabinet table. But if he did, we shall look with great interest to the first edition of his memoirs which, no doubt, will not be long delayed as soon as he passes into Opposition.
But for the rest of us, and perhaps more especially for the hon. Member for Cornwall, North (Mr. Pardoe)—may I congratulate him on having dug himself out of the snow and having reached the debate today—the motion will enable us to debate these options, too. Speaking for myself, and I hope for my right hon. and hon. Friends. I am old-fashioned enough to believe that these are matters which should more properly be debated in the House of Commons rather than behind closed doors with the Trades Union Congress or, indeed, at Transport House.
More than that, it will give Government spokesmen a chance to reconcile their published utterances with their performance and with the aspirations of

Transport House and Mr. Jack Jones who, of course, has just retired with distinction but who no doubt still exercises a considerable influence over the fiscal destinies of the Labour Party which he has supported for so long. Finally, it will give Government spokesmen a chance to reconcile their position with that of the hon. Member for Cornwall, North, and this will be an interesting intellectual exercise.
I remind the House that we had a somewhat similar debate last year, on 3rd March. I am sorry that the Chief Secretary does not propose to participate in the debate today. He might find the words that he uttered on that occasion making a rather unpalatable diet today, 12 months later. It might tax even his robust political digestion. Although I know his memory to be infallible, I remind him of what he said on that occasion:
I agree that the levels of direct taxation are too high. I have said this on numerous occasions both in the country and in the House. Equally, we have made clear that it is our intention to reduce them, but the extent to which any Government can reduce the burden of personal taxation, or taxation generally, must depend on the economic and industrial performance of the nation and the level of total national income."—[Official Report, 3rd March 1977; Vol. 927, c. 656.]
By that test, the economic and industrial performance of the nation must have been very dismal. Indeed, we know it to have been so, and we know that the level of the total national income has hardly increased at all.
With that, I shall turn if I may to the Government's amendment. It
welcomes the start Her Majesty's Government has made in reducing levels of direct taxation; applauds Her Majesty's Government's success in controlling inflation and restoring financial stability; recognises the need to provide adequate public services; and notes that the present Conservative leadership is still wedded to old fashioned dogmas which in the past created so much squalor, social divisiveness and injustice.".
Those are fine, ringing words, but let us test them against the facts. Let us see what kind of start has been made.
We have had 1 per cent. off the basic rate. Personal allowances are less in real terms than they were in 1973. Inflation is possibly down to single figures, but not less than that. As for financial stability, the January trade figures have taken a little of the brightness out of the


false dawn of October. As regards the level of public services, I only remind the House of the conclusions of the Labour Home Affairs Committee under the inspiring presidency of the right hon. Member for Bristol, South-East (Mr. Benn).
If there has been a start, it has been so protracted and so spiritless as to be imperceptible to the taxpayers in this country. It is now nearly four years since the first General Election in 1974, and I understand that in April we shall have to congratulate the Chancellor of the Exchequer on being the longest surviving Chancellor in this century. However, I say to him that longevity is no substitute for success.
I think that we are entitled, therefore, to stand back and contemplate the right hon. Gentleman's handiwork and to contemplate the tax structure and the rates to which he has dedicated his not inconsiderable talents. There is nothing like the comment of a candid friend, and I remind the Chancellor of the comment last year of the hon. Member for Cornwall, North who described our tax system as "a Gothic nightmare". The hon. Gentleman is always enamoured of his own phrases, and I have no doubt that if I had not quoted him he would have quoted the comment on this occasion. Perhaps I have relieved him of that burden.
On this occasion, the hon. Member for Cornwall, North presumably considers that the tax structure is equally excessive, equally Gothic and equally bizarre, but he condemns successive Governments for raising excessive amounts in income tax. How far he goes back in his historical analysis I know not. It may be that he will catch your eye later in the debate, Mr. Deputy Speaker. It may be that he will have to go back to Gladstone to find a respectable ancestor for the position which he will be adopting today. Certainly Mr. Lloyd George was not reticient in the amounts which he was prepared to raise by way of income tax.
I congratulate the Government on this occasion that, with the doubtful and possible exception of Denmark—and I am happy to leave comment on the tax structure of a friendly Power to Mr. Mogens Glistrup—we have the worst-constructed, most ill-balanced and oppressive system of direct taxation of any country in the Common Market.
I say that for a variety of reasons. First, the Government have over-relied on direct as opposed to indirect taxation. The latest analysis shows, for instance, that France relies for only 11 per cent. of its budget on direct taxation, Italy 19 per cent., Germany 27 per cent. and the United Kingdom 37 per cent. I hope that I shall carry with me the hon. Member for Cornwall, North at least on this part of my analysis.
Secondly, this Government have placed over-emphasis on capital taxes. Again we are without doubt the sole country in the EEC which derives anything like such a proportion of its direct taxes from taxes on capital. If that was not sufficient, we understand from Transport House that we are to expect a wealth tax some time in the not-too-distant future.
Thirdly, our taxes on income bear harshly, without any apparent design, at every level. My hon. Friend the Member for Norfolk, North (Mr. Howell), to whose researches I pay tribute, has identified with great precision the poverty trap. His conclusions have been amply reinforced by the slightly more academic investigations of the Meade Committee.
If I may start at the lower levels of the employment market, income tax at 34 per cent. and national insurance contributions totalling 40 per cent. start to bite at the poverty line and often below it. It can be readily demonstrated that the marginal rates, if means-tested benefits are taken into account, sometimes reach 100 per cent.—for instance, in the case of a married man with two children earning £35 a week. Does the Chief Secretary regard that as a sparkling example of the success of the fiscal policies over which he has presided during the past four years?
I move a little higher up the scale and come to the person on average earnings. There was an illuminating encounter between my hon. Friend the Member for Chingford (Mr. Tebbit) and the Prime Minister in the debate on the Gracious Speech. I recall the Prime Minister, fumbling for his papers, saying that he had a jolly good answer which would destroy the Tory Party. I can only conclude that he is now so insulated in his broad Sussex acres that he is no longer in touch with the person on average earnings. I would encourage the right hon. Gentleman perhaps to spend a little


more time, as he did in the past, in the counting houses of Cardiff where perhaps he might receive rather more brutal and direct advice on this problem.
The position on this can be summarised easily. A married man on average earnings is now paying more in tax and national insurance contributions out of a smaller real income than he did in 1973. More than that, proportionately he is paying away a greater part of his income than any comparable person in any other country of the Common Market.
I move a little higher up the scale and come to middling incomes—[Interruption.] The hon. Member for Birmingham. Perry Barr (Mr. Rooker) is no doubt concerned with management and no doubt he will attempt to catch your eye, Mr. Deputy Speaker, to reinforce what I am about to say. I notice the very telling amendment in his name and that of the hon. Member for Coventry, South-West (Mrs. Wise). I am glad that that alliance has survived the test of time and no doubt it will be put to good use in our debates on the Finance Bill.

Mrs. Audrey Wise: Perhaps the hon. and learned Gentleman will comment on the last phrase of our amendment, which is
and notes that there is no valid case for tax hand-outs to the rich".

Mrs. Elaine Kellett-Bowman: Including the miners?

Mr. Rees: I know that the hon. Lady would not perhaps be over-moved by anything I would have to say on that point so I will quote to her the words of the Chief Secretary, leaving her to battle it out with him. He is so good at textual analysis that I should like him on this occasion to put a gloss on his own words, to which I will come later. At present I am dealing with the middle income group. Even on that the Chief Secretary has words of wisdom which I am happy to quote. They could hardly have come better from the EEC Bench:
I want to turn to the question of the erosion of differentials. I have said on numerous occasions that we recognise that the combination of the incomes policies of successive Governments, together with tax increases and inflation, has considerably eroded the differentials between the highest and the average paid, between the unskilled and the

skilled, and between those in work and those out of it. I have never hidden the fact that I recognise that there is a problem with which we must deal.
But we are still waiting because the only way in which we can deal with that problem is by dealing with the basic rate of tax. If the Chief Secretary is a little coy about those words I would remind him that he can derive support from Mr. Hugh Scanlon who puts it in language such as he and we might welcome:
There is an absolute need to restore differentials—that is incontrovertible—and not just between crafts but also among the middle employed and among professional people. Failure to use financial inventives as a means of motivation may significantly erode job performance".
We can say that again and again. Those words may well qualify Mr. Scanlon for the award of a Companion of Honour from these Benches.
Moving a little higher up the scale, to assuage the anguish of the hon. Lady, if one is successful, difficult though it may be in the prevailing economic climate, in pushing one's income above £6,000, one's tax rate will increase up to 83 per cent. Here again the Chief Secretary has words of wisdom:
The disincentive applies particularly to entrepreneurs, professional people and others who begin to feel that there is no point in earning more. … It would be comparatively cheap. … to give substantial relief for those at the top end of the scale".
I hope that the hon. Lady will take the Chief Secretary to task if she cannot accept those lapidary words.
Then, one retires loaded with honour, perhaps with a pension of some kind, and this is where social divisiveness creeps in as between the inflation-proofed pension and unearned income. On the latter, derived from savings from unearned income, there are rates up to 98 per cent. There is social divisiveness between those who have inflation-proofed pensions in the public sector and those who have to depend on personal savings.
Finally, to end on a tragic note, aggregating a lifetime of generosity, the hot breath of the taxman is already on the shoulders of one's executors and 75 per cent. is taken away in capital transfer tax.
How did such a crazy, absurd structure come to be erected? I believe that it can shortly be stated—that it derived from the


improvidence and malevolence of the Government against a background of continuing inflation.

Mr. Max Madden: Some could argue that the hon. and learned Gentleman has a vested interest in the complexities of the tax system as a tax barrister. Would he agree that the likely consequence of a substantial reduction in direct personal taxation would be a substantial increase in indirect taxation? Would he therefore agree that as indirect taxation bears most heavily on the poorest, a move in that direction is not in the interests of low-paid workers?

Mr. Rees: I am grateful to the hon. Gentleman for intervening. Let me tell him that on a personal front I am always happy to work politically to the disadvantage of my own professional interests, but I do not think that that was the point of his intervention. Let me remind him of what the Chief Secretary said—that VAT
would be nothing like as regressive as we have often thought".
It is all there. As the late Aneurin Bevan said, why gaze into the crystal ball when one can read the book? If the hon. Gentleman will look at the volumes of Hansard he will find all this coming from the mouths of his hon. and right hon. Friends.
How did this incredible structure come to be erected? In the first instance, the Chancellor of the Exchequer was so busy winning the October 1974 General Election, placating his hon. Friends below the Gangway, so busy relishing the howls of anguish which he hoped to extract—and did extract—from the rich that he did not realise that he was doing damage, possible irreparable damage, to the social and economic strength of the country.
Ever since those happy halcyon days, we have had the Government Front Bench fluttering their sensitive hands over levels of taxation, as though the tax machine were some kind of juggernaut kept in Somerset House over which they had very little control and about which they were slightly alarmed. They have been sending out emissaries to discover what can be done to remedy the position, and to discover whether any self-employed business men still exist. As a recent Answer has demonstrated, they are a very rare species in this country—7·2 per cent. of the whole work force of the country,

compared with 17·3 per cent in Japan Perhaps there is a moral to be drawn there We are entitled to ask, what have the British people to show for four years of hard labour? A higher standard of living? Higher employment? Better economic performance? A higher system of public services?
What of the future? I can only turn again to the words of the Chief Secretary. He said last year that there were four ways of obtaining substantial tax reductions. There was increased borrowing power, which he rejected, as I do. There were cuts in public expenditure, though he said it was difficult to ask workers to accept a pay deal on the basis that there might be cuts in public expenditure. There is no need to ask for massive cuts in public expenditure. Let us wait and see. Let us consider the Expenditure White Paper, which no doubt we shall be debating in a couple of weeks' time. It is constructed on the basis of an increase in public expenditure of 2 per cent. The Treasury evidence to the Select Committee put it at 4 per cent., but on some views it is more likely to be 8 per cent. Obviously, a standstill in public expenditure would give substantial room for manoeuvre to the Government in the fiscal field.
Then the Chief Secretary suggested a switch from direct to indirect taxation, which I give to the hon. Member for Sowerby (Mr. Madden). He said on that occasion that VAT
would be nothing like as regressive as we often thought … but it cannot be done over-night."—[Official Report, 3rd March 1977, Vol. 926, c. 666–72]—
[HON. MEMBERS: "The hon. and learned Gentleman has said that twice."] Of course I say it twice because these are words of wisdom which we must mark and repeat up and down the country, though for the moment I am content to repeat them back to the Chief Secretary. I hope the hon. Member for Cornwall, North took notice of what the Chief Secretary said on that occasion. I wonder whether he has noticed that nothing has been done about VAT over the past 12 months. I hope that he will join us in condemning the Government for having done nothing about a switch to indirect taxation.
Finally, the Chief Secretary said that we must have better economic growth than


we have been able to achieve in recent years. He can say that again and again.
The Expenditure White Paper has been constructed, I understand, on the basis of growth of between 3 per cent. and 3½ per cent. next year. That, again, must be a factor making for a little more flexibility than possibly the Chief Secretary was prepared to discuss during those wintry afternoons in the snow at Chequers.
Beyond that there are two other factors. There is North Sea oil—and we await with eager anticipation the promised Green Paper, and we shall look forward to a debate on it. We shall look forward, too, to the forecast of the revenue that we are likely to derive from North Sea oil, which is bound to give the Government considerable scope for cutting taxes if they have set their heart on that particular objective.

Mr. John Pardoe: I would not bank on that.

Mr. Rees: The hon. Member, who is obviously privy to the internal debates of the Government, says that we should not bank on that. Time will show. I shall press the keener for this Green Paper and hope that it will appear before Easter.
Finally, there is the buoyancy factor. This is a factor to which I have never heard any right hon. or hon. Member on the Government Benches pay any attention. Of course, high rates lead to avoidance and evasion. There is no doubt about that. There is, of course, an almost paranoiac obsession on the Labour Benches below the Gangway with avoidance and evasion. Indeed, there is continuous pressure for the screw to be turned tighter and tighter. The latest offering from Transport House, I understand, is that in some way the residents of the Channel Islands should be subjected to United Kingdom rates of tax. I wait breathlessly to find out how those rates will be enforced over there.
With rates at their present level, we move into a kind of twilight world, the world of the "lump" and the 714 certificate, a world from which the divers have only just escaped, by the kind connivance of the Financial Secretary. I hope that he will explain precisely why it is

that he found it necessary to exempt divers from Schedule E. I suspect that it was because he realised that they have a highly marketable skill and could take themselves abroad. What applies to divers applies to a whole range of other talents which are increasingly saleable in an international market. Beyond that, the Government have had to resort to the various shabby expedients of taxing fringe benefits while leaving such glaring anomalies as free coal.
The Government have increased the staff of the Inland Revenue from 69,000 in 1974 to 83,000 now with a further projected increase to 90,000. The only secure and, indeed, expanding range of jobs is to be found in the Inland Revenue. I have nothing against the Inland Revenue. There is a great deal of industry and talent locked up there which could be put to far better use outside the confines of Somerset House. Nowithstanding these extraordinary recruitment figures, the machine is still groaning. The 120th report says that the Inland Revenue staff are still under extraordinary pressure.
Against that background, the only two constructive ideas—perhaps I should describe them as destructive ideas—to emerge from the "think tank" of the Labour Party are, first, the taxation of Channel Islands residents, and secondly, a wealth tax. Will Labour Members themselves perhaps glance for a moment at the Irish precedent and notice that in Ireland the Minister for Finance has just repealed the wealth tax there on the basis that it has destroyed jobs and investment and has demoralised the country? Are the Government Front Bench too proud to follow the Irish example and say that they will have nothing more to do with the wealth tax? Even if they cannot cut taxes in this forthcoming Budget, I believe that the greatest fillip to morale in this country would be the unequivocal assertion that they will have nothing more to do with the wealth tax.
There are certain areas in which we shall look for something in the Budget, where we shall test strongly the sincerity of the Government's protestations. I mention first the marginal rates. As the Chief Secretary has said, it would be relatively cheap to do something for those paying the highest rates. To abolish the higher rates altogether would cost only £700 million. I would contend for half


of that. Hon. Members laugh, but do they realise that £17 billion is taken by way of income tax at present, as compared with £7 billion, I think, in 1973? Then again, we shall look for something for the basic rate taxpayers.
The hon. Member for Putney (Mr. Jenkins), who is so concerned for the arts, might ponder what it might do for private patronage if the higher rate taxpayers were relieved of that burden. Here we have it. Patronage is apparently to be concentrated in the hands of the State. That, too, will be the material for another debate in due course.
Beyond that, let us look for something off the basic rate. To reduce it to 30 per cent. would cost £1,810 million—a considerable figure, but perhaps not more than the Government are prepared to mortgage in bringing in an intermediate rate. Let me put the Government on notice that certainly we on the Opposition Benches shall not regard an intermediate rate band as tackling in any measureable way the question of differentials. It will complicate the PAYE system, it will benefit single people at the expense of married couples and for most people any possible advantage would be immediately removed by the increase in national insurance contributions which is to come into force on 5th April.

Dr. Jeremy Bray: Will the hon. and learned Gentleman make clear that none of his proposals would have any effect at all on the poverty trap?

Mr. Rees: I have not come to that. However, the question of the threshold, too, is important. The hon. Member may not have noticed that his right hon. Friend has already made some concessions to a most important amendment, which was—if I dare call it so—the brainchild of my hon. Friend the Member for Blaby (Mr. Lawson) and was carried with Conservative and Liberal votes in Standing Committee.

Mr. J. W. Rooker: Before that inaccuracy is repeated throughout the debate let me say that the amendment on indexation was tabled in Standing Committee by myself and my hon. Friend the Member for Coventry, South-West (Mrs. Wise). It was further added to by the hon. Member for Blaby

(Mr. Lawson) after we had taken the initiative.

Mr. Rees: I apologise to the hon. Member and to the hon. Member for Coventry, South-West. Of course, I recollect the memorable interventions that they made. I hope that they will be repeated in the next Standing Committee on the Finance Bill. However, I remind the hon. Member that long before he ever strayed into those upper rooms, long before the Patronage Secretary was ever rash enough to put him on a Finance Bill Standing Committee—perhaps the Patronage Secretary will not repeat that this year; I do not know, but it must be a matter for delicate negotiations—and long before the hon. Member ever joined our ranks upstairs, we were debating such matters under the skilled, sophisticated guidance of my hon. Friend the Member for Blaby, to whose contributions I am very happy to pay tribute on this occasion.
Therefore, I say to the hon. Member that in this field our record is impeccable. It is we who have led, and the hon. Member and the hon. Lady have followed. We are always happy to have their support. If it should be that, with becoming modesty, the hon. Member jettisons his own amendment, we should welcome him in our Division Lobby tonight.

Dr. Bray: Will the hon. and learned Gentleman please make clear that he is not proposing to do anything further at all to relieve the poverty trap?

Mr. Rees: I have not said that. I am drawing up a menu. The Government will no doubt put prices on it, as I can, too. I am just indicating the areas in which we shall test the Government's sincerity. The hon. Member can wag his finger at me, but let us wait and hear what is in the Budget and let us wait to hear what the Financial Secretary tells us today, to our advantage or disadvantage.
I suspect that all that the Government are toying with at present, with the connivance of the hon. Member for Cornwall. North, is some kind of intermediate rate band that will have very little effect whatever on the poverty trap. At least the hon. Member for Motherwell and Wishaw (Dr. Bray) can make common ground with me on this: that an intermediate rate band will not solve the


poverty trap. If that is all that is offered to us today or in the Budget, I hope that the hon. Member will join us in the Lobby and demonstrate what he feels about the crazy fiscal structure that has been erected over four years by a Government whom he has, off and on, supported.
Beyond that, the range is limitless. However, let us look at investment income surcharge. I believe that this will be pushed into the forefront of our debates, because we understand that there are to be some mouth-watering share incentive schemes to be peddled. Tax reliefs are to be offered. These are certainly ideas that find favour with me. I recall that it was the Prime Minister who first discriminated against share option schemes in the Finance Bill in 1967. The Conservative record on this is impeccable. We have always favoured this kind of scheme but we have never heard anything constructive from Labour Benches.
If we are to have share incentive schemes, work people in business must be offered shares in the company in which they work. Are dividends from these shares to be subject to the investment income supplement? If not, what is the respectable case left for taxing the retirement pensioner who is living on the savings of a lifetime and who has bought perhaps shares in the company in which he has worked.
We live in a mixed economy and the Government must be concerned about the free flow of private capital. What does the Chancellor propose to bring forward on capital transfer tax? Will he do anything to protect the family business or farm, or anything for forestry? What about capital gains tax? I hope that the Government Front Bench will not be to oppressed by the difficulties thrown up in the discussion paper emanating from Somerset House. We shall be looking for something substantial in this area, whether it is tapering or indexation. Do the Government believe that this tax is worth preserving at all?
These are areas in which the Government can demonstrate that they mean something with their fine words. They must demonstrate that they mean something more than a little cheap electioneer

ing. I have the greatest doubts about their intentions. We have noticed a perceptible cooling of the atmosphere. The heady days of October and November, when everything seemed possible to the Chancellor of the Exchequer, have long passed. The brittle confidence of that Indian summer has been punctured by the January trade figures.
We must look to the inspired leadership of the Prime Minister. We have it on good authority from the British Ambassador in Washington that the Prime Minister sees himself as Moses leading us to the promised land.

Mr. Ian Lloyd: Was he found in the bullrushes?

Mr. Rees: Who found whom in the bullrushes? I leave it to the Pencourt File to determine that.
We have been wandering in the wilderness for four years. No one on this side of the House would deny that it seems more like 40 years. The main commandment brought down from Sinai is open to speculation but it appears from the Pen-court File to be "Thou shalt bear false witness against thy neighbour particularly against his intelligence services" or "Thou shalt covet thy neighbour's house, thy neighbour's wife, his servant, his maid, his ox or his ass and everything that is his shall be subject to capital gains tax, capital transfer tax and the wealth tax."
The analogy is perhaps more exact than hon. Members realise. Moses did not lead his people to the promised land, for he died in the land of Mohab. However, he survived to 120 years of age, and when he died he still had all his faculties and his eyes were clear to the end, which must be bad news for some young aspirants to the Prime Minister's office, notably the Foreign Secretary and the Secretary of State for Prices and Consumer Protection.
So it will be in this case. The Prime Minister will not lead us to the promised land, because the British people do not want a promised land with a basic rate of 34 per cent. income tax, marginal rates of 98 per cent. and a poverty trap which discourages thrift. They want a promised land where it pays to work, save and take risks. Only under the leadership of my right hon. Friend the Member for Finchley (Mrs. Thatcher) can they be led


to this new land. On that basis I commend the motion to the House.

4.45 p.m.

The Financial Secretary to the Treasury (Mr. Robert Sheldon): I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
'welcomes the start Her Majesty's Government has made in reducing levels of direct taxation; applauds Her Majesty's Government's success in controlling inflation and restoring financial stability; recognises the need to provide adequate public services; and notes that the present Conservative leadership is still wedded to old fashioned dogmas which in the past created so much squalor, social divisiveness and injustice.'.
This is the second year that we have had a substantive debate on tax matters in advance of the Budget. It gives us the opportunity to examine some of the main options available to the Government before coming to the House. It limits the area in which we can disclose the analysis which has been carried out, but at the same time it enables the House to express its views and to state clearly its priorities.
The hon. and learned Member for Dover and Deal (Mr. Rees) asked what were the consequences of the present Government's taxation policy. It is right to explain both the consequences and some of the causes of our taxation policies.
In the lifetimes of many of us, there have been three economic crises in which living standards have actually fallen. The first was in the depression when unemployment rose to 21 per cent. of the working population and 27 per cent. in Scotland. This led to actual pay cuts in the public services at a time when income tax was 4s. 6d. in the pound. The inflation rate was less than zero—prices were actually falling. Death duties were a tax on the improvident and the careless At the same time, there was near-mutiny in the Navy and there were those in fashionable society who were busily flaunting their wealth in the midst of poverty. This created a disillusioned and bitter generation and left its mark on much of the character and personality of our people.
In the second economic crisis, much greater hardship was called for because it occurred during the Second World War. A reduction of living standards was called for among all our people. How-

ever, that crisis was handled differently. On that occasion, under imaginative leadership the sharing of the sacrifices became the national objective. By means of enlightened social policy, people accepted the inevitable decline in their living standards and the consequent increase in taxation. The 100 per cent. excess profits tax and the rate of 19s. 6d. in the pound on income tax were not just social or economic instruments or means of increasing the efficiency of our people but were also a means of keeping our people united. The signal was that we were a responsible, united and caring democracy. The Beveridge Report covered much of this ground, showing that there was a possibility of laying plans to improve the conditions of those who were less well off.
The third economic crisis resulted from the fivefold increase in oil prices in 1973. Unfortunately, on that occasion we were ill prepared to deal with it. There was trade union resentment because of the Industrial Relations Act and there was the Barber explosion of the money supply—55 per cent. in two years. Inflation, comparing fourth quarter with fourth quarter in the years 1971, 1972 and 1973, was 9 per cent., 8 per cent. and 10 per cent.
There were few who believed the Tory Government's nonsense that those were problems of success. They knew, as we know now, that they were problems of economic failure and, more importantly, problems of industrial and political failure. The oil crisis would have hurt our economy severely whenever it came. It hurt us worse because it added a mighty dose of inflation just at the time when our economy was already being stuffed with cost increases due to the Barber boom.
When the Labour Government took office, it was clear that a reduction in the living standards of our people threatened us once more. We had two previous models to work from—the years of the 1930s and the war years. The question was which of those models we should copy. We knew that there would have to be sacrifices, but the question was how they were to be determined. We chose to equalise those sacrifices, to assist those who were least well off and to ask for extra burdens from those best able to bear them.

Mr. Wyn Roberts: Is the Minister saying that the 1½ million unemployed are not in that situation because of the policies pursued by the Labour Government in the last four years?

Mr. Sheldon: The hon. Gentleman will know that the 55 per cent. growth in money supply in a period of two years led to inflation before the oil crisis and that that inflation amounted to over 10 per cent. Furthermore we have seen a reduction in the inflation figures, and we shall have some encouraging news for most of this year.

Mr. Terence Higgins: We might overlook the fundamental point that in October 1974 we were told by the Chancellor that inflation was under control and would be brought down to 8·4 per cent. But I am sure the public will remember that claim. However that may be, the Minister appeared to be arguing that, in the absence of the oil crisis, the miners strike and so on, a reduction in the standard of living was necessary. Is that what he intended to argue?

Mr. Sheldon: No, I was not arguing on those lines. I was pointing out that we were already in the middle of inflation, rising at the rate of over 10 per cent. Fourth quarter on fourth quarter in 1972–73, we saw an inflation figure of 10·3 per cent. before the effects of the oil crisis were felt. Furthermore, there was a 55 per cent. increase in money supply and, therefore, whatever happened, we were already geared to a massive inflation. We had to face that reaction at the same time as we suffered a fivefold increase in oil prices, which took us into a very hard time indeed.

Dr. Bray: To many Labour Members, it is depressing to hear yet another parallel drawn between the present circumstances and the situation in the 1920s in the attribution of the rate of inflation only to monetary phenomena. Will the Minister remember that this has no basis in fact, and certainly has no substantial support on the Labour Benches?

Mr. Sheldon: My hon. Friend is right to point out that monetary factors are not the only ones to be considered. I shall be dealing with that point later. I think he will find that what I have to say

a little later will find some echo in the views which I know he holds.
There are those who believe that democracy can exist only in a country in which there is positive economic growth. Such people believe that the fulfilment of economic expectation is the only means by which tolerance, understanding and the democratic process can flourish. The pre-war history of Germany and France and the post-war history of Latin American and certain other developing countries tend to support that view.
What has happened in the past few years has been the frustration of economic expectations. It was dealt with by a recognition that the British people had the right at such a time to expect the pattern of the second of these economic case histories rather than the first. They have the right to expect shared sacrifice rather than a widening of the gap between rich and poor.
It is against that background that income tax revenue was increased, that the higher rates of tax on earned income rose to 83 per cent. and that the higher rates of tax on unearned income rose to 98 per cent., and it is against that background that we have fulfilled the contract between the generations under which retirement pension has increased by 16½ per cent. in real terms since October 1973 at a time of economic difficulty.
It was this attitude involving the sharing of burdens and the giving of assistance to those in need which enabled us to retain the cohesiveness of the people by doing what was right and what was seen to be right and fair to the people as a whole.

Mr. Peter Bottomley: With regard to the Minister's reference to fairness and giving attention to the needs of the various generations, may I ask whether he has given his mind to the subject of community support for children? He may remember that the amount of money provided in child tax allowance, child benefits and family allowance was decreased in terms of the 1977 figure from £2,100 million to £1,800 million. That is a 14 per cent. drop in community support for dependent assisted children, who, of course, cannot go out to work.

Mr. Sheldon: I shall be dealing with that matter later. There was a time when some Conservatives, faced with economic and social changes of this kind, would have agreed with the approach adopted by Mr. Macmillan and Mr. Butler, as he then was—Conservatives who believed in Toryism with a human face, and men who believed deeply in the essential unity of the country. Unfortunately, the Conservative Party does not now possess as many of those people as it used to have.
Do we believe that at a time of falling living standards—a situation forced upon us by external factors—a reduction in income tax paid by the wealthy, a boost to those with unearned incomes, a considerable injection of incentives to the better off and a continuation of the voluntary estate duty would have made political sense, even assuming that the improvement in incentives which might have been caused by these measures made economic advance remotely comparable to the extreme anticipation of Conservative Members at all possible?
I believe that we had to take the action we did because of the economic circumstances, and not only because we believed that it was the right thing politically to do. At the time there was no alternative because the people's living standards were already in decline. Those who take the contrary view must accept that the damage caused to our social and political identity over these crisis years, even if only small, would be offset by worthwhile economic benefits and that a glorious transformation would occur.

Mr. Nicholas Fairbairn: If the Minister is trying to lecture us about fairness, will he not remember that unearned income has been "earned" because it has been taxed twice? Is it not absurd for the Minister to blame everything carried out by his side on world events which could not be avoided and on oil price increases, and to blame every step taken by the Conservative Government on Conservative policies? If the Minister is trying to be fair, should he not apportion blame equally?

Mr. Sheldon: The difficulty was that the Government in the period 1970–74 came in with one view, they learned their lesson, but they could not cope with the situation and did their famous U-turn.

The problems they discovered were at variance with the plans they had laid when in Opposition. Therefore, Labour had to inherit the consequences of that failure—a failure that was condemned by many Conservatives.
Let me say a few words about the glorious transformation which is expected by so many people flowing from the speech of the right hon. Lady the Leader of the Opposition in her speech last Friday. She then said:
We are determined to axe tax.
I do not know who claimed parenthood for that slogan, but I believe that the right hon. Lady should choose another rhymester. However, I shall not go into the literary merits of that phrase. The right hon. Lady went on to say that this was the only hope of recreating a healthy business climate which we need so that the marvels of modern technology can bring prosperity to these islands. We have frequently heard the claim that managers, executives and others need these sorts of incentives. No one has gone so far as to talk about the marvels of modern technology, but this sort of expression has been in use for some time. We do not need to set up a test bed to try out the theory. We have seen it in operation twice, and it is instructive to learn what happened when the views of the right hon. Lady were carried out.
In 1961, Selwyn Lloyd effectively reduced surtax on earned income by raising the starting point of £2,000 a year for a single person to £5,000 a year. This was an enormous increase, at a stroke, as one might say. One would expect evidence of a healthy business climate and the marvels of modern technology to be available after such a dramatic change. That was an axing of taxing in an extreme form. Yet three years later, we found that, far from prosperity having been brought to these islands, we had a further economic crisis and a total failure of those policies.
One run-through might have been a mistake. Let us therefore look at what happened when we had another rare chance of seeing this method of dealing with our crises in practice.
In 1971, we had the unification of the tax system and a change in the distinction between unearned and earned income. Unearned income was called investment income and, instead of being


taxed at 22 per cent. above earned income, it was taxed at 15 per cent. above earned income. In addition, the top rate for earned income was reduced from 88¾ per cent. to 75 per cent. That was another massive axing of taxing.
Anyone who believes that such action leads inevitably to the results stated by the right hon. Lady should look at the results of those 1971 changes. Inflation rates rose, our economic position, far from improving, became worse and the then Prime Minister, the right hon. Member for Sidcup (Mr. Heath), instead of being able to rely on his axing of taxes to lead to the results he had predicted, had to go to the City and elsewhere to complain about the lack of investment. The marvels of modern technology were still not bringing prosperity to these islands.
What hope can we have that these marvels will follow from such action? Few will deny that incentives have some effect, but to pursue them as one pursues bubbles, irrespective of other considerations, including the considerations of all the people of this country, is to have too myopic a vision—a fault that some Opposition Members frequently display.

Mr. Nicholas Ridley: Must we not also ask ourselves why advocates of a high-tax society, such as the right hon. Gentleman, have succeeded in producing nothing better than a fall in industrial production in the last five years?

Mr. Sheldon: I am not in favour of very high rates of taxation, but neither do I believe that axing taxes is a universal panacea or a philosopher's stone to which we must turn when we are in trouble so that everything else will come right. I do not believe that just by axing taxes we shall recreate a healthy business climate so that the marvels of modern technology can bring prosperity to these islands.
I believe in an intelligent assessment of the situation, and this has no part to play in special pleading for the wealthy under the guise of looking after the less well-off. We all have a part to play in creating the just society that our people can expect. Taxation is a means of getting revenue in the way best suited to those who bear the burden.
In "The Right Approach to the Economy", a document published by a number of leading Opposition Front Benchers, the section on investment income surcharge says:
We are increasingly doubtful about the wisdom of retaining any kind of Investment Income Surcharge".
Those who are used to the mealy mouthed words that are frequently used to cover up political differences know that when we see the names of the right hon. Members for Lowestoft (Mr. Prior) and Leeds, North-East (Sir K. Joseph), the right hon. and learned Member for Surrey, East (Sir G. Howe) and the hon. Member for Guildford (Mr. Howell) on a document, there is bound to have been a considerable papering over of the cracks.
I am not sure whose views are being expressed on this matter. Clearly the right hon. Member for Leeds. North-East is more doubtful than, perhaps, the hon. Member for Guildford. We see here a questioning of the difference between earned income and unearned or investment income. Of course, older people have a larger proportion of investment income. They have made preparations for their retirement and have had longer to accumulate the capital that lies behind investment income.
We have taken account of this fact. That is why the investment income surcharge has a higher threshold for those over 65, and why there is an age allowance in place of the ordinary personal allowance.
It is right that there should be an investment income surcharge and that such income should be treated differently from earned income. There are expenses associated with going to work that perhaps we do not take sufficient account of in our arrangements. Travelling expenses and incidental expenses have to be offset as costs of employment.

Mr. Arthur Lewis: Not for Ministers.

Mr. Sheldon: I know my hon. Friend's view on this matter. We have had much correspondence on the subject and I am sure that it will continue for a long time.
There must be a distinction between earned and unearned income because of the difference between the manner of earning income and the receipt of dividends and other payments. There is also


underlying capital in investment income which gives a certain freedom of manoeuvre that is not always available to those with earned income. In addition, something of the work ethic remains which says that income derived from work and effort should be taxed at a lower rate than that which is not derived from work and effort.
Our improving financial position, which I am pleased to note and which will, no doubt, play a part in much of what is said in the debate, allows us to consider easing the tax burden, and it is useful to look at the changes that have taken place and to take them into account in planning future tax strategy.
One of the problems is that taxation policy must follow and take account of social changes. At the start of this century, there were many fewer income tax payers. It was a tax for the better-off and, naturally, its structure reflected this. For example, hardly any middle-class wives worked and the personal allowances included a special concession for married men. The married men's allowance was higher than that for a single man because it was based on the assumption that, on the whole, taxpayers' wives did not work. Since those days there have been considerable social changes and taxation policy has not always been quick to follow them up.

Mr. Wyn Roberts: Will the right hon. Gentleman cut his cackle and accept the fact that to cut taxation creates the incentive to work and an incentive to provide work?

Mr. Sheldon: Nobody can deny that we wish to operate at as low a rate of taxation as is compatible with the Government's other policies. If there are to be cuts, surely it is only sensible to consider the various ways in which taxation can be cut and the various options open to the Government in so doing.
Before the war, income tax was largely a middle-class tax. Thresholds were fixed so that income tax was normally paid only by those with above-average incomes. Before the war, too, women worked only up until the time that they were married, at which time a number of employers, including the banks and much of the public sector, dismissed them. That was quite a common arrangement before

the war. At that time it was normal for a wife to give up work upon marriage.
In 1951, only 21 per cent. of married women were employed. In 1976, 49 per cent. of married women were employed. In the years with which we are most familiar the number of married women in employment increased from about one-fifth to one-half. It is now the birth of the first child that causes a large drop in the family income, whereas before it used to represent only a modest additional expenditure to a family. That was because the wife was not working and the birth of the first child represented only a small burden upon the family. It is now the first child that causes the largest reduction in family income as the wife and mother has to give up her job. It is that change that is the major cause of a decline in the family income.
From the time of the Beveridge proposals in the war years until last year, no family allowance was payable for the first child. In so many instances its arrival was economically little of a burden, but today it is the fundamental cause of a dramatic decline in the earning power of the family. That fact is only beginning to be recognised in the social tax provisions that we devised.
If we are to have the cuts that are being talked about, we must discuss which sort of cut should be implemented. Income tax cuts fall into three basic categories plus those on the higher rate bands. There are three methods of tax cut and I have distinguished between the higher rate bands and the other categories because one special feature is involved. It is the only element of our income tax system that is truly progressive.
Apart from the higher rate bands, which I now leave on one side, income tax can be reduced by raising personal allowances, by cutting the basic rate or by introducing a lower rate tax band. Each of these methods has a different effect upon the income of the ordinary taxpayer.
A cut in the basic rate will give most to those whose income is around the top end of the basic rate band, or somewhat above. Those who benefit most in proportional terms are those whose current incomes are about £7,000 to £8,000 a year.
Increasing personal allowances has the great advantage that it removes many from tax altogether. If required, it can discriminate between married taxpayers and single taxpayers. For those with low incomes the tax burden is greatly reduced.
A reduced rate band reduces the rate at which lower-paid people pay tax. It removes no one from tax and gives most benefit in proportional terms to those whose incomes are equal to the size of the reduced rate band plus the size of the personal allowances. That is by comparison with the increase in the personal allowances. A reduced rate band provides the largest benefit slightly higher up the income scale than does the personal allowance increase. It gives most to single persons and working wives.

Mr. Rooker: Will my right hon. Friend admit that the distinction that he has drawn is not clear? The reduced rate band will still keep the low-paid within the tax system. It is bad enough when the low-paid pay a 34 per cent. marginal rate, and it is equally bad when they pay 25 per cent. on the lower rate band. That is the point that should be made at this stage.

Mr. Sheldon: I thought that I had made that point. I shall repeat it. The raising of thresholds removes many from tax altogether. The reduced rate band is an easier approach to the paying of tax but it keeps people in tax. It also gives the larger benefit to those whose incomes are slightly higher up the income scale or, depending on the width of the band, those who come into tax at the ordinary level of the threshold. That is the main change. There is the additional factor that single persons and working wives, along with one or two other categories, benefit rather more than the married.
The other method is to vary the proportions between direct and indirect taxes, which the hon. and learned Member for Dover and Deal has mentioned.

Mr. David Stoddart: I have been closely following my right hon. Friend's argument on direct taxation. At one stage I thought that he was about to deal with the problem that is faced by families, but he has not done so. He said clearly that the point at which the family does worst is after the first child

arrives, yet he made no reference to the extreme necessity to concentrate the bulk of the help in direct taxation relief for the family. My right hon. Friend must know that when the woman of the family is not able to go out to work there is a sacrifice of about £1,000 per annum of tax allowances. That is probably the most difficult area of taxation, and it needs the closest and most immediate attention. Families are suffering more than any other section of the community.

Mr. Sheldon: I agree with my hon. Friend when he talks about the problems of families. He will know that with the change from child tax allowances to child benefit we are now in a position where benefit is not in the control of the taxation system, although it is under the control of the Government as a whole. Therefore, it falls to be treated slightly differently. The provisions are different. The time lags between decision and implementation are different. There are other Ministers involved. All that makes for greater complexity in arranging any family support system that we wish to devise.

Mrs. Wise: Does my right hon. Friend accept that it is the Government's responsibility to ensure that the change to child benefit, which was intended to benefit families, achieves what was intended? My right hon. Friend says that other Ministers are involved. I hope that he is not implying that that is an obstacle. The vibrations that we tend to get indicate that although the Treasury does not have sole control, Treasury influence is paramount.

Mr. Sheldon: I do not think that there is any difference between us. I was talking about the mechanism, and the mechanism has changed. That change has a bearing on the way in which these matters fall to be treated. Child benefit can be fixed according to the level that the Government think fit. All these matters fall to be debated and discussed. We can have a family support system based upon child benefit that gives much greater benefit to families than does the child tax allowance system. There is nothing in the mechanism that prevents that.

Mr. Peter Bottomley: We cannot divorce the structure from the way that


the structure has been used, especially during the last three or four years. Does the right hon. Gentleman deny that during the change to child benefit and the extension of family allowance to the first child, there has been a net loss of £20 per year per child in terms of what comes out of the Exchequer?

Mr. Sheldon: The hon. Gentleman must wait for the Budget. We cannot discuss the amounts that can be paid. The point that I made is valid. The child benefit provisions can be up to whatever the Government think fit and they are not impeded by the changed structure. Indeed, the new structure can be a positive advantage in the way that has frequently been described from this Dispatch Box on other occasions.
Another way in which tax cuts can be made is by changing the proportions of direct and indirect taxation. The hon. and learned Member for Dover and Deal referred to the way in which direct taxation has grown. It depends how direct taxation is defined—for example, whether we include corporation tax, which is clearly a direct form of tax. On that basis, there has been little change since 1969–70 right up to date. But corporation tax has been a lower contributor to taxation and has been much offset by incomes tax.

Mr. Jim Craigen: My right hon. Friend referred to trends. Is not one of the trends in the last 10 years that the proportion from direct taxation has gone up from about 37 per cent. to just over 50 per cent., according to the Board of Inland Revenue estimates for the current year, whereas the proportion from corporation tax has dropped from over 11 per cent. to an anticipated 7 per cent. this year?

Mr. Sheldon: I was about to make that point when my hon. Friend intervened. I am glad to have his support for what has happened on this occasion. I was endeavouring to point out to the hon. and learned Member for Dover and Deal that corporation tax has reduced as a proportion of the whole, because of the stock appreciation scheme without which companies would have found themselves in severe difficulties. The only sensible solution is to get the stock appreciation scheme on to a long-term footing as soon as possible. I think that many hon. Members will agree that if it had not been

for this scheme, there would have been severe difficulties for manufacturing industry in particular in this country.
Specific duties have been reduced in real terms. There is a demand for indexation generally, but the problems of indexing the specific duties are particularly difficult. Changes of this kind present a number of problems which are not easy to foresee and which require close examination.
Perhaps I may now deal with the option of modest increases in public expenditure. The Opposition would not choose to increase public expenditure in general. However, in "The Right Approach to the Economy", referring to public expenditure cuts, they say:
This is not a prescription for poorer social provision; it is a recipe for better housekeeping in all the public services.
I know that big cuts in public expenditure can be allayed by Government Departments becoming more efficient and purposeful, but when the Opposition make these claims they must confess that the secrets that they claim to have about how to make the public services more efficient are similar to the secrets that they claim to have on other matters, such as race, and so on. These are not solutions; they are a mask which conceals their real intention. We had a foretaste of that intention from the hon. Member for St. Ives (Mr. Nott), who, in an unguarded moment, talked about cuts in transfer payments. I think that underneath the provisions of which they make much this is what they really have in mind.
I do not believe in the concept of a fixed maximum proportion of public expenditure to gross domestic porducts. I regard the idea of a limiting figure as rather silly. At a time of slow economic growth, if public expenditure were to be increased, personal consumption could fall to unacceptable levels.
There are cycles in these matters. Given large increases in GDP growth, there may come a time when demand for better services will be voiced and expressed by the people of this country. At such a time it is right that we should be ready to provide for such demand.
Income tax, as I have already mentioned, has been used to raise a greater proportion of revenue than we would


normally wish to see. There is no room here for any kind of dogma. What frightens me is the new dogma on monetary matters that seems to have overtaken the Opposition. Monetary growth is important in the long run. But it is essential to distinguish various elements in it. The formation of a mechanistic relationship—a blind addiction to looking at the barometer without looking out of the window to see whether it is raining—is unwise, and I am very frightened of the use of instruments in that way.
The role that the Opposition see for the greater independence of the Bank of England, which they forecast in "The Right Approach to the Economy", brings to my mind some unpleasant comparisons with the situation before the war, when Montague Norman was in charge. However, even under him, the Government had some control over what is and must remain an essential part of the economy.
What are the Opposition after? These new Tories, who have fallen for the idea of control of the money supply, make me wonder whether they are after a new theory for old intentions. That is the fear in the back of my mind. I cannot acquit them of the idea that heavy deflation and cuts in public expenditure might be undertaken under cover of the mask of this respectable and fashionable notion of money supply control. If they were ever to implement this idea—I do them the courtesy of assuming that they will have grave doubts if it comes to the final action—there would be a collapse of business confidence with grave consequences for the economy and for our society that we cannot accept. That is the predictable result of what the Opposition are saying. I ask them to think carefully before proceeding further along that road.
I believe that the Opposition motion must be opposed. I ask my right hon. and hon. Friends to support the Government amendment in the Division Lobbies later this evening.

5.28 p.m.

Mr. Russell Fairgrieve: It is good debating procedure in the House for a Member, when he rises, to try to answer some of the points made by the previous speaker—in this instance, the Financial Secretary. It may be that I

am naive, or that I have failed to understand the subtleties of the right hon. Gentleman's argument, because, apart from three small matters. I shall have to leave that task to my right hon. and hon. Friends on the Opposition Front Bench.
First, the Financial Secretary repeatedly said that because of or out of this background tax levels rose to 90 per cent. They did not rise automatically; they were put up by the Government.
Secondly, the Financial Secretary referred to this Tory Party being somewhat less liberal than its predecessors. I do not know whom he had in mind. Some of my hon. Friends who have not been here long are viewed as being too liberal by some of their colleagues and constituency parties. But the fact that we wish to bring common sense into taxation measures is a different matter. I agree with my right hon. Friend the Leader of the Opposition that we should "axe tax." That is a wonderful saying.
Then the Financial Secretary spoke about the ethic of work. We are concerned about the taxes not just on earnings from work but on savings from work. That is the anomaly about which we are talking. We are talking not about inherited wealth but about the taxes on personal savings being at a different rate.
As we approach the Budget there is no doubt that the commentators will have their usual field day and that the Chancellor of the Exchequer will be receiving a lot of advice—some good, some bad, and some indifferent. He is limited in what he can do because of the 1974–75 spending spree and the huge political bribes that were made at that time. That will cause him great difficulty in the coming Budget. It will be difficult for him to give the people back most of the extra amount of their own money that he has taken from them.
There has been talk about the rate of inflation being down to 9·9 per cent. But we are talking about the rate of inflation, not inflation. This present so-called low rate means that prices will double in seven years. What a thought. We want a stop to inflation, not just a coming down of the rate.
For the Government to bring tax down to where it was when they came into office means that they must give back to


the people some £5,000 million-plus. We were at that level without the aid of North Sea oil revenues when we demitted office. We are looking forward to what the Chancellor does in his Budget.
One of the troubles arises from the completely different approaches of the Labour Party and the Opposition to the whole question of taxation. Since the end of the Second World War, every time a Labour Administration has come into office taxes have been raised. Every time a Tory Administration has come into office taxes have been lowered. That is not a political point; it is a historical fact. With that fact alone one wonders why people ever vote Labour. The Labour Party is now not only the natural party of high unemployment but the natural party of high taxation. The real tragedy is that Labour Members do not recognise the link between high taxation and high unemployment.
We believe that taxation is somewhat of a necessary evil. It removes people's money to finance the affairs of the State. The trouble with the United Kingdom today is that the State is spending far too much of the gross national product of the nation. Today it is about 60 per cent. I believe that the danger point for every country is around 50 per cent. and that we should be aiming for 40 per cent. If we achieve that level there would be a release of energy that would bite into the unemployment figures. This necessitates a return of many of the activities that are currently being carried out by the State to private, competitive enterprise.
The Labour Party uses taxation not for its real purpose but as a form of social engineering which is counter-productive in itself. That is why the Chancellor of the Exchequer comes out with phrases such as "howls of anguish". The Labour Party's Budgets are politically motivated and are sometimes vindictive.

Mr. Rooker: All parties have used the taxation system for social engineering purposes. If when taxation was first introduced it had been based on all income, all the people would have been eaxed the same. Even so, many years ago it was recognised that one cannot tax the low-paid and needy. That is social engineering.

Mr. Fairgrieve: I do not accept that argument. Taxation is a necessary evil. It is the Government taking people's money to finance the affairs of the State. We should take as little as possible. Our policy has been that taxation should be at a low level and that there should be an income level below which people are not taxed.
The Labour Party's taxation policy always hits someone who wishes to contribute for himself. For example, if someone wants to contribute towards the education of his child the Labour Party removes the grant-aided schools. That hits not at the really wealthy person but at the person who is at the intermediate level—the person who can afford only to make a contribution.
The same applies to housing. We believe that mortgages should be subject to some form of income tax rebate. The Labour Party does not believe in that, and it is also opposed to the sale of council houses. In that way it hits not the wealthy but those who want to make a contribution. The same applies in the Health Service. Someone may not be able to afford to go for treatment at a private nursing home but may be able to afford a private bed in a hospital for an elderly relative. So the Labour Party decides that pay beds are to be abolished.
I am reminded of the schoolboy joke. "When is a door not a door?" "When it is ajar." One could ask "When is a private ward not a private ward?" "When it is a public ward occupied by one Socialist politician."
I turn to capital transfer tax. We have no objection to the principle of moving from a donor to a donee tax, which was what the change from death duties to capital transfer tax was. But the levels are too high. These levels run against human nature and the natural desire of a person who wishes to pass down something to his children.
Taxation in this country is destroying employment, destroying initiative and destroying the national wealth which is the standard of living of all our people.

Mr. Wyn Roberts: Can my hon. Friend confirm my own sincere belief that unemployment has risen to its present level of 1½ million largely because of the increases in taxation imposed by this Government?

Mr. Fairgrieve: I nearly mentioned my hon. Friend the Member for Conway (Mr. Roberts) earlier. I absolutely agree with him. There is a close link between high taxation and high unemployment.
Reference has been made to small businesses. If someone starts a small business—if the Employment Protection Act does not stop him from taking on people anyway—if he takes on more people and makes more money, does the Labour Party cheer? No. It hounds him, harasses him and taxes him until in the end he fails or chucks it up and then, back to the unemployment register go the people that he would have employed. That is no doubt a pleasant Socialist thought, but it is sheer stupidity.
At the other end of the scale is the problem of the entrepreneur. Regardless of what Labour Members think of entrepreneurs, they produce employment. They are the people who run the companies which will break into the unemployment cycle. It is ridiculous to tax such people on earned income at 83 per cent. If we wish to reduce unemployment and encourage the start of more business, that level must be reduced, preferably to about 60 per cent.
I agree that we should move towards indirect taxation and away from direct taxation. Let us consider the historical point about VAT and purchase tax, which it replaced. Purchase tax was basically Socialist in concept. It was introduced in 1942 as a temporary measure, but as we know, taxes are inclined to stay and to increase rather than to diminish and disappear. Purchase tax was imposed at various levels and the Government and the civil servants decided which items were necessities and which were luxuries, and taxed them accordingly. It should be the duty and responsibility of the individual citizen to make that decision. VAT is operated at a lower level than purchase tax and is imposed on everything other than zero-rated items. It leaves the choice of what to purchase up to the consumer.
The Conservatives will certainly, if returned to power, bring VAT back to one level and a zero rate—

Mr. Pardoe: What level?

Mr. Fairgrieve: VAT in this country is at a lower level than for any of our industrial competitors in Europe who are doing better than we are, and so, if we

are to reduce direct taxation, there is a case for increasing VAT, because direct taxes will be reduced.

Mr. Rooker: By how much?

Mr. Fairgrieve: I am not the Shadow Chancellor.

Mr. Pardoe: The hon. Member should not use international comparisons as a guide to VAT, because if that argument applies, it is an argument for having multi-rates of VAT. All the European countries have multi-rates.

Mr. Fairgrieve: I do not accept that all European countries have multi-rates. I shall be interested to see what the Chancellor does in the Budget. Presumably the Lib-Lab pact will ensure a very strong voice for the hon. Member for Cornwall, North (Mr. Pardoe) in the Budget.
We in the Conservative Party believe that there should be a move from taxation by PAYE to taxation by PAYS—from pay-as-you-earn to pay-as-you-spend.
The Labour Party must realise that a relationship exists between taxation and employment. If Labour Members want a higher standard of living for all the people of this country, and if they wish to bite into the disgraceful levels of unemployment, they must allow reality, common sense and human nature to enter into their taxation policies and to push to one side this continuance of Socialist doctrine and dogma.

5.43 p.m.

Mr. Hugh Jenkins: It always surprises me that the Conservative Party, which I suppose regards itself as the party concerned with good housekeeping in a personal and national sense, can hold such conflicting views. I presume that Conservative Members accept that if the standard of living of a family is to be maintained, its income must be maintained as well. That is so obvious that it hardly needs saying.
Let me translate that into the position of the State. The Conservative Party always seems to imagine that the income of the State can be drastically reduced while its standard of living in terms of social services can be maintained. That is such arrant nonsense that the people of this country cannot be expected to swallow it. The Conservatives persist in assuming that the income of the State must


go down while its expenditure increases. That is a simple and straightforward point which, when it is exposed, causes the Conservative arguments to fall to the ground.
The Conservatives persistently tell us that direct taxation must be reduced. If they are not arguing that the total income of the State must be reduced, it must follow that they believe that the State should have some other form of income, and that must mean that they believe that indirect taxation should be increased. Clearly it is not so much the total amount but the sort of taxation that concerns them. Or are they coming perilously close to saying that they want the poor to be more heavily taxed and the rich to pay less tax? That is the direction in which their arguments seem to be moving. When we try to obtain from them in simple terms that ordinary people can understand what they are after, we find it very difficult to discover what they mean.

Mr. Wyn Roberts: The hon. Member talks about families as opposed to the State. The fact is that the average family in this country is £6 a week worse off under this Government than it was under the previous Government. Taxation has a great deal to do with that.

Mr. Jenkins: I do not believe that to be the case, but even if it were it would not prove the hon. Gentleman's point. In the motion he and his party are saying that the taxation system penalises hard work, stifles enterprise and increases unemployment, and it calls for
a substantial and continuing reduction in the burden of direct taxation in preference to an increase in public expenditure.
The Conservatives seem to be saying that they want income tax to come down, but they do not tell us precisely how they wish this to be done. I suspect that they want a reduction in the standard rate. If that is so, they are seeking to give advantage to the wealthy at the expense of the poor, because that is what a reduction in the standard rate would mean. If that is what the Conservatives want, the people of this country should understand what they are up to.
I support the two amendments to the motion and I am sorry that they cannot both be carried. If it were possible to carry both, I should vote for both, given the opportunity. They are much more

constructive and much more the sort of thing that the people of this country can grasp than the blanket condemnation voiced by Conservative Members.
I regret, however, that neither of the amendments carries a reference to the desirability of a wealth tax. Our armoury of fiscal weapons will not be complete and no serious reduction in income tax will become possible until we have a wealth tax which can do something to rectify the gross inequalities which disfigure social relationships in this country.
The hon. and learned Member for Dover and Deal (Mr. Rees) referred to the wealth tax. I regret that the Green Paper which proposed an acceptable way of dealing with this matter was not translated into legislation. I hope that when my right hon. Friend the Minister of State replies to the debate he will be able to reassure us that the Government fully intend to proceed with a wealth tax as soon as possible, thereby bringing this country into line with many of our European neighbours who are so much admired in fiscal terms by some Conservatives.

Mrs. Wise: I accept my hon. Friend's modest criticism of the amendment in my name and that of my hon. Friends. We are certainly in favour of a wealth tax, and the omission is simply a matter of practicalities.

Mr. Jenkins: I am most grateful to my hon. Friend for that assurance. I have no doubt that when my right hon. Friend the Minister replies and gives an assurance that it is the Government's intention to do that, my hon. Friend will applaud him as loudly as I shall. We await that with confidence.
I come now to my specific point. I am rather bothered that my right hon. Friend the Financial Secretary is no longer present, because my correspondence to which I wish to refer has taken place with him. Therefore, I shall have to ask my right hon. Friend the Minister of State to refer to this matter. The suggestion has been made that there has been a recent change of policy in the Treasury in relation to the taxation of literary awards and prizes, which were previously regarded as non-taxable. It is now suggested that they are being increasingly regarded as taxable, which I believe is a change of policy. Therefore, as a


number of people who from time to time receive literary awards happen to live in my constituency—Putney is full of artists and literary people—I am raising the matter.
I shall mention two particular cases which I took up with my right hon. Friend. As they have already come to public notice, I know that the people concerned will not mind my mentioning them. The first was that of Mr. Gavin Ewart, the poet, who received an Arts Council award. As he had previously received the award, he thought that it was not to be taxed, but then he was told not only that it would be taxed but that it would be taxed retrospectively, having been received two years previously.
When I wrote to my right hon. Friend, he replied arguing that the award was in his opinion taxable:
I should emphasise that there has been no change in Revenue practice with regard to the taxation treatment of these awards.
It may be that it is necessary in the Treasury to tell fibs from time to time. For example, when it comes to Budget intentions it is sometimes desirable to conceal the truth. But one does not want to translate them into a statement of this sort, which can easily be exposed.
The same sentence was used when I raised the matter of the taxation treatment of Andrew Boyle's award of the Whitbread Prize, which he received in 1974 for his biography of Brendan Bracken. The prize was believed not to be taxable, but Mr. Boyle has been told that in the Inland Revenue's view it is taxable. My right hon. Friend wrote:
I should add that there is no question of and change in the Revenue's interpretation of the law applying to these awards
Is there not? I rather suspect that there is.
Let me give the evidence for suggesting that my right hon. Friend has been misled in this matter. As long ago as the 1960s, Her Majesty's Principal Inspector of Taxes agreed with the Society of Authors:
A prize awarded on the ground of honour or public esteem, and not directly sought or worked for by the recipient, would not be a professional receipt, while a prize arising from a specific competition or contest in which the author seeks a reward would be taxable.

On that basis, neither of my constituents awards should be taxable. Therefore there has been a change of policy. What is set out in my right hon. Friend's letter constitutes a change of policy.
Let me give a little more evidence on this. The Arts Council has become worried about the matter. It has always been able to tell recipients of its individual grants that they are tax-free prizes. In 1965–66 it spent £42,000 on such prizes for 146 artists. In 1975–76 the figure went up to £420,000 on 792 artists. I have some evidence that the Revenue took the view that de minimis could no longer apply. Because the sum was no longer only £42,000, the Revenue decided that it could no longer put a telescope to the blind eye and ignore the prizes. When the sum approached £500,000 from the Arts Council, the Revenue began to think that perhaps the matter should be tackled.
If my right hon. Friend had written to me saying that that was what had happened, we should have been on common ground, but he said that there had been no change of policy, when all the facts suggest that there has been. If there has been a change of policy, it should be spelt out and justified.
The Arts Council is pursuing the matter and has probably spent on legal opinion the amount of one good prize already. If prizes that are not sought and are not worked for are to be regarded as taxable income, we are moving into a new ball game. I should like my right hon. hon. Friend to examine this and not maintain the fiction that there has been no change of policy when all the evidence shows that there has been. Let us have it spelt out and decide the circumstances in which prizes are and are not taxable. Let us not have the present position in which prizes can be awarded on the assumption that they are not taxable and then have retrospective taxation imposed two years later. That is unreasonable.
I ask my right hon. Friend to tell the Revenue "All right. The law lays down no clear rule here, and what you do about it is one of those things which is left to the Revenue's decision in relation to the particular circumstances of the recipient. Up to now, you have decided as a matter of practice that you will not exact taxes


on these things. This has come to be expected. There is no reason why people who have been in the expectation of receiving awards which are untaxed should suddenly, with no previous knowledge, be placed in the position of having the awards taxed." If there is to be a new policy, let it be spelt out for the future but let the present policy, under which the awards are not taxable, continue to be applied until something new and different has been agreed with the rewarding bodies, the Arts Council and other appropriate organisations.
As the finance director of the Arts Council wrote to me,
The position is clearly complicated and I have now written to the Inland Revenue at Somerset House and asked them to stay their hand on outstanding cases until we can settle the future. In this respect we are now going forward to Leading Counsel and I can keep you abreast of the progress here. We intend to consult the Inland Revenue in an attempt to obtain an overall solution.
That is all right, and no one could object to that, but let us no longer maintain the fiction that there has been no change of policy. Let us agree that, until such time as a change of policy is agreed, the existing system shall continue to operate.
I want to say a word about the Meade Report. This is a very interesting report. I believe that Professor Meade and his group have put their fingers on an important aspect of the British taxation system. It is that, as compared with taxation systems in other countries, the British system of direct taxation is extremely unpopular. Of course, no taxation anywhere is popular. The Meade Committee suggests a complete change of approach. This change could be applied without damaging social consequences, and possibly with some considerable social benefit, especially if the wealth tax recommendations of its report are incorporated in its general recommendations.
I readily recognise that, in suggesting that the report should be looked at seriously by the Government, I am moving on to delicate ground, because this is the sort of combination of changes which could be used either for social benefit or for social disadvantage, and the application of it would be a matter for the Government of the day. I ask my right hon. Friend the Minister of State to say that the Government will

look very carefully at the recommendations of the Meade Committee's report. It is a distinguished committee with a distinguished chairman, Professor Meade. I hope that the Government will come up with their views on the report in some appropriate form—perhaps a Green Paper or something of that sorts—before too long.
It is not sufficient to push these suggested changes on one side. As the Meade Report says, changes in the fiscal system cannot be sweeping. They have to be approached carefully. But what the report recommends is that the direction in which those changes shall be made should be charted beforehand and that the changes should move in an agreed direction.
It would be desirable for the House to know what are the Government's reactions to the Meade Report and their feelings about it, and whether they will come forward to the House with a series of recommendations as to how the findings of the report might be applied in a Socialist manner.

Mr. Wyn Roberts: I agree with the hon. Gentleman about the position of Gavin Ewart, whose poetry I enjoy very much, but will he direct his mind to the amendment in the name of his hon. Friend the Member for Coventry, South-West (Mrs. Wise)? Does he not agree with me that the amendment is totally malevolent and contradictory in that it blatantly asks for extra public expenditure and at the same time for direct tax cuts?

Mr. Jenkins: What the amendment does is to suggest the way in which any cuts should be applied and that if there is to be relief from direct taxation it should be applied at the bottom end of the scale. As my right hon. Friend the Financial Secretary to the Treasury said, the object of the Government will be not to cut tax right along the line, so that the rich get most benefit, but rather to take out of the direct taxation system those who can least afford to pay.
I am grateful to the hon. Member for Conway (Mr. Roberts) for what he said about my distinguished constituent, Gavin Ewart, and I hope that the Minister will be able to give me some assurance on this point when he replies to the debate.

6.4 p.m.

Mr. Peter Brooke: The hon. Member for Putney (Mr. Jenkins) has spoken of a wealth tax. It is a subject to which, if he will allow me, I shall return in the later stages of my speech. If in the meantime I do not follow the Financial Secretary to the Treasury into the labyrinth of numbers into which he led us, and which every such debate occasions, it is not because I fear the Minotaur upon the Treasury Bench but rather in an arid desert to supply some light relief, such as is provided by the drinks interval during the six hours of a test match on a hot day.
The words of the motion put down by my right hon. and hon. Friends, and so agreeably and forcibly moved by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees), states simply the burden which excessive taxation represents. The amendment put down by the Liberals does not vastly disagree with it. The Government have put down their own amendment, which marries, not altogether happily, the styles of Dr. Pangloss and of Dickens. The Government's friends below the Gangway have put down their own trailer for the more distant amendments of the summer.
During the past year that I have sat in the House, the Government have shown commendable signs of repentance about the level which taxation has reached. Of course, as my hon. Friend the Member for Aberdeenshire, West (Mr. Fairgrieve) has pointed out, these levels were of the Government's own making. In the outside world it is said that a manager cannot be judged until he has been in a job long enough to have to live with the consequences of his own decisions. In the longevity of office which the Chancellor of the Exchequer has now achieved—to which my hon. and learned Friend the Member for Dover and Deal referred—he has had plenty of opportunity to recognise the cul-de-sacs into which he led fiscal policy in the early years of his reign.
The Treasury is ever a bed of nails, but no fakir—I spell that word deliberately with an "i"—ever fashioned or sharpened his bed of nails as laboriously as has the present Chancellor. The Government's early White Paper on public expenditure envisaged no perceptible rise

in personal consumer expenditure in the ensuing years. I will say for the Government what they have now said for themselvs in their latest White Paper on the same subject, namely, that they have been as good as their word, and there has been no perceptible rise in personal consumer expenditure during those years. The price has been paid in recent years not by the Chancellor himself but by the Socialist candidates in what were hitherto Socialist constituencies—and no doubt the electors of Ilford, North will shortly add to the list.
Somewhere along the road to Damascus—given the conduct of all negotiating behaviour which traditionally exists in the back streets of Damascus, and which has now been adopted by the Government in their management of the black list—it is clear that the Chancellor saw the light, and he now recognises that direct taxation is too high. That view is concisely reflected in the Opposition's amendment.
Against this background of seeming unanimity across the Chamber, on terms which the Opposition have echoed again and again in the past four years, I should like to add five points for consideration for the future. First, notwithstanding the Government's deathbed repentance, they are, I fear, still of the view that personal income in the pocket instead of in the tax coffers does not constitute an incentive. I will put a case on this. It is a recognised commonplace of remuneration theory that money may not surely be a motivator but that it is incontrovertible that its absence is a de-motivator.
The disadvantage of direct tax rates which vastly exceed those of competitor countries is that men and women stop going the extra yard. If one were a manager, one could no longer ask colleagues or subordinates to work socially undesirable hours, because their wives would say to them—as my wife has said to me—that at their tax rate there was no point in their working at evenings or weekends. And so they do not, and the total enterprise suffers, for it is often the extra yard that counts in a competitive environment. The history of this island since the war is a macrocosm to match the microcosm that I have just described for the individual.
My second point, which can be extended to the investment income surcharge as a whole, relates to the savings


of a single girl prior to her marriage. A girl can be working for, say, six or seven years and accumulate the sort of savings to which yesterday's home purchase Bill referred. When she marries, the investment income from those savings will be aggregated with her husband's income and taxed at his marginal rate. This seems to be a manifest disincentive to savings by a single girl, and her withdrawal from work upon becoming a mother—to which the Financial Secretary alluded in his speech—only serves to make this combined marginal rate more penal and more unjust.
The effects of the investment income surcharge upon individual investors, who play so important a part in maintaining orderly financial markets, is well known. No doubt others of my hon. Friends will return to it.
Third, there is the subject of investing in one's own company. Coming events cast their Pardoes before them, if I may be excused the phrase, and no doubt we shall have some sort of scheme of general application in the Budget. In the meantime, we have a situation where senior members of professional firms are inhibited from putting money into their own firms—even if they are not receiving any special price or special deal—because any capital gain they would make would be taxed at marginal income tax rates. That seems in every way opposite and opposed to the economic needs of the country at this time, and opposite to the noises that have been emanating from the Chancellor of the Duchy of Lancaster about the virtues of small business.
I am also told that it not only applies to small firms but that it can apply equally to large industrial companies and that it can be overcome only by that vast investment of professional time which the right hon. Member for Huyton (Sir H. Wilson) so often used to decry. This last observation has a particular irony in the context of a great company which in recent years has been recovering from a bad patch. All the efforts of management in achieving that recovery—with all the extra work that that involves—has necessarily gone unrewarded under incomes policy and high marginal tax rates.
I totally understand the arguments for employment protection, but in such cir- 
cumstances as I have described it adds insult to injury to those managers involved in that recovery that the only ones among their colleagues who have accumulated any capital throughout that recovery have been those few whose services were dispensed with and who received ex gratia payments running into tens of thousands of pounds.
I have mentioned this case at some length because capital gains under present legislation were not available as an alternative way of rewarding those managers who would otherwise go unrewarded without infringing incomes policy.
Fourth, I have mentioned employment protection. Its effect on unemployment, especially in small businesses, is now well known. I understand that the Government are now resurrecting ideas of a wealth tax, despite the comments of the hon. Member for Putney, who has now left the Chamber. For a Government who have phrased today's Panglossian amendment—which implies therein that they have at last recognised that business confidence plays an important part in investment and employment—to bring back talk of a wealth tax at present makes one despair a little.
As the ancient poet had it, those
whom God would destroy He first sends mad",
but today it would be all of us, not just the Government or the wealthy, who would be destroyed by the introduction of such a tax with its effect on confidence throughout the small business sector.
Fifth, and finally,—I hope I can end on a non-controversial note—I want to refer to complexity. I hope that the Government will return again and again to simplification. Form P3, which explains to employees how they are coded, now runs to six whole pages of notes. I think that all of us in this House owe it to those outside this Chamber to urge on the Government that one way of reducing the burden of tax would be to continue resolutely with the process of simplifying the system.

6.15 p.m.

Mr. J. W. Rooker: I agree wholeheartedly with the last point that the hon. Member for City of London and Westminster, South (Mr. Brooke) made, both for the reason which


he gave and for reasons which I shall give. The tax system, whether corporate taxes or individual taxes, is in a complete and utter mess. Because the system is so complex, there is an incentive to create an industry to avoid paying one's proper and fair taxes. I shall come to this in a moment.
I must confess to some disappointment at not learning very much more about Conservative Party policy. The hon. and learned Member for Dover and Deal (Mr. Rees) was twice asked by my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) what precisely he would do to counteract the poverty trap. That was a phrase which came strange from the lips of the hon. and learned Member for Dover and Deal. He said "I am coming to that", but he never did. He simply sat down.
The sum total of Tory Party policy advocated in the hon. and learned Gentleman's speech was to increase the rate of VAT, although to what level we do not know. He also spoke of a decrease in the basic rate of income tax—which, as my right hon. Friend the Financial Secretary said, has many problems when taken in conjunction with the other forms of reduced tax. There was also a proposal to reduce capital taxes—capital gains tax and capital transfer tax—and one for the abolition or reduction of investment income surcharge.
That seemed to be the sum total of Conservative policy. But we did not get any figures. The hon. and learned Gentleman said nothing about the poverty trap, although he spent some part of his speech referring to it. The decision not to say anything about what level the Conservative Opposition think VAT ought to be at means that we should take their attitudes as being somewhat cynical.
For myself—I have no doubt that some of my hon. Friends may not agree—I think there is a case for a single rate of VAT. By definition, that would mean raising one rate and dropping the other. I understand that having a common rate of VAT of 10 per cent., in addition to certain zero-rated items, would increase the revenue by about £600 million and add only 0·75 per cent. or 0·8 per cent. to the retail price index. That is a modest increase in the circum-

stances. At the same time as an increase in revenue, there would be a simplification of the VAT system, because it would not be possible to raise the basic rate to 10 per cent. and retain the 12½ per cent. rate as they are to close together to be meaningful or worth the paperwork involved. There is a case to be made for a simplication of the VAT system.
If I were asked—which I have not been—to draw up a list of proposals for the Budget, on the revenue side there would be a movement to one rate of VAT. There would also be a proposal for the abolition of the cut-off point for social security tax—the 5¾ per cent. I see no reason why people should not pay 5¾ per cent. of all their income instead of having a cut-off point at £105 or £110 a week.
That means a marginal rate of tax if one takes income tax and national insurance contributions together, which for all practical purposes is a social security tax. Taking them together, there is a lower marginal rate of tax on an income of around £7,000 than there is on an income of £6,000. Such a change would bring £480 million into the revenue.
Here are two items on the revenue side that would produce around £1 billion. I shall not read out a shopping list, because until one knows what the Chancellor has in mind it is a great deception on the public to argue what one would like to see in monetary terms without the detail necessary on the revenue side. Of course, the Conservative Opposition are well aware of this. They have considerable taxpayers' funds at their disposal—about £500,000 in the last three years—in order to run their parliamentary assistance and research effort.
I would have thought that we would have a better opening speech than that of the hon. and learned Member for Dover and Deal, who seemed to rely on his own prejudices and the research work and parliamentary Questions of one hon. Member—the hon. Member for Norfolk, South (Mr. MacGregor), I believe. To that extent, I believe that the Tory Party has done itself a disservice this afternoon.
As I mentioned earlier, the tax system is now so complicated—both corporate and personal taxes—that there is scope


for wide areas of abuse. It is very easy to get headlines in the national or local Press, as the hon. Member for Aberdeen. South (Mr. Sproat) has made clear in recent years, by having a go at the scroungers. I deprecate that as much as anyone else, but the sum total of abuse of the social security system is only £3·2 million out of a total of £11 billion.

Mr. Peter Bottomley: On what evidence does the hon. Member base the sum of £3 million? I do not dispute his general point, but there is an element of certainty in what he said which is normally absent.

Mr. Rooker: I was not certain. I was about to say £2·6 million, because that was the figure in the previous year. But I know that the figures changed recently with the latest national insurance year, and the latest figure which was given in a parliamentary answer just after Christmas is a little more than £3 million, which is accepted to be abuse.
One can see headlines every day outlining this, but one never sees headlines in the popular Press about the abuse which is taking place on the income tax side. The Board of Inland Revenue's annual report always makes interesting reading, and I draw attention to tables 9 and 10 on pages 44 and 45. In 1976, the last year for which we have figures, the amount of tax written off as irrecoverable was £28 million, of which income tax represented £21 million. There were other smaller taxes and the amounts were small, so they do not alter my argument.
Then, if we look at table 10 to see the reasons why the tax was written off as irrecoverable in 1976, we see that £10 million was due to insolvency but that £12 million—four times the level that is accepted to be lost because of social security abuse—was written off because the taxpayer was untraceable or had gone abroad. It is no wonder that we need an increase in Inland Revenue staff to chase down the people involved in this massive abuse. In terms of total Government tax revenue of £17 billion or £18 billion, £12 million is chicken feed. But so is the small abuse discovered on the other side of the Welfare State equation. One is blown up out of all proportion, whereas the other is politely and neatly swept under the carpet by editors in Fleet

Street who probably have their salaries paid from the Cayman Islands anyway.

Mrs. Wise: Will my hon. Friend agree also that there is a difference in the prosecution policies in relation to the two kinds of offences?

Mr. Rooker: Very much so, and no doubt my hon. Friend will develop that from the information in the report.
When, however, there is a bit of a scare, it is easy to lay on public expenditure in order to provide a few more inspectors in the DHSS, whereas it does not seem possible to provide a few more people to do a good job in the Inland Revenue making sure that people pay their lawful taxes. We have a situation where, in answer to a Question the other day, I was told that the current establishment of the Inland Revenue is some 450 below what was agreed to be necessary to do the job and that no action is being taken to find these additional people.
The second example on the abuse side which I give is buried deep in the latest report of the Comptroller and Auditor General on the Appropriation Accounts for 1976–77, published two weeks ago in House of Commons Paper No. 138. That contains two or three very interesting paragraphs on the outturn of the Inland Revenue.
The Comptroller and Auditor General makes a point in paragraph 75 relating to taxation of directors' remuneration. Throughout that and the ensuing paragraphs, he says quite clearly that the Revenue is losing tax on earnings that directors are taking out of their companies and failing to tell the Revenue. Having made certain accepted qualifications about this, he ends up by saying:
Nevertheless there remains a substantial proportion which does reflect the failure by companies to apply PAYE properly to directors' remuneration.
I want to know what is to be done about that.
But the more serious charge of the Comptroller and Auditor General appears in paragraphs 80 to 84 on taxation of partnerships. Here he has done the House a service. He has uncovered a further loophole leading to substantial tax avoidance, and it concerns the switching on and off of partnerships, by and large


between the same people—firms of accountants, probably the legal profession and possibly the medical profession, but certainly in areas where partnerships operate. It is possible to close down and open up partnerships, given that it is done at the right time of the year, and avoid tax liability.
The Comptroller and Auditor General says in paragraph 83:
Examination by my staff suggested that many partnership changes were in fact contrived to secure the maximum tax advantage from the commencement and cessation provisions and that in some cases the process was repeated at regular intervals … the total profits escaping assessment might be of the order of £5 million a year and the consequent annual tax loss about £3 million.
I have heard that figure before as a fraud on the Welfare State.

Mr. Norman Lamont: I agree that tax evasion is a deplorable practice, but I hope that the hon. Member will not give the impression that tax evasion is confined to schemes affecting directors and partnerships. The cash economy—the moonlighting, the doing of odd jobs, the builders doing jobs without contracts—has become very widespread in our society. It is practised by ordinary working people just as much as by the people mentioned by the hon. Member, and the cost of that sort of evasion is much, much greater.

Mr. Rooker: There are no figures for that sort of evasion. I am the first to admit that there can be degrees of moonlighting. But the hon. Member included builders in his list of those who are ripping off the system. It was the present Government who sought to close the loophole regarding the "lump". We heard constantly about the 714 certificates and, of course, the Opposition complained. We had a debate almost a year ago this week on the 714 certificates. That was a loophole closed by the Government. The effect had been dramatic in that it stopped proper training in the building industry, it stopped the supply of skilled craftsmen coming forward, and it meant that wages went through the roof and local councils could not get homes and hospitals constructed.
I am giving my side of the argument. It is open to Opposition Members to give their side. However, it is very rare

for this House to debate general tax matters as we are able to do today, and it is noticeable that when the Opposition have the opportunity to do so they never seem to concentrate on the area of tax avoidance, when the hon. Member for Kingston upon Thames (Mr. Lamont) could rightly make the point he has just made and when, of course, he would be met four square by Government supporters putting forward the other side of the equasion.
No one is saying that everyone is an angel. But I am talking about known abuses. I do not know where the £12 million which the Inland Revenue wrote off because the taxpayer was untraceable lay in the economy. I do not know whether it came from moonlighting or from people closing businesses and leaving the country. I have no means of knowing. But it is £12 million in lost tax revenue which we do not hear about very much.
The other area of tax evasion, simply because the system is so complicated, is in corporation tax. The hon. and learned Member for Dover and Deal is well acquainted with this area of tax abuse—I do not mean that personally, of course—because he and I have taken part in television programmes where comment has been made on it.
Just one example will suffice. George Wimpey and Company, one of our largest building companies, for a fee of £2·8 million was able to purchase a tax fiddle which meant that it did not have to pay £18£2 million which was due in corporation tax. This was well documented in The Sunday Times of 29th May last year, and certain loopholes in these forms of corporation tax abuse were closed in the last Finance Bill.
My right hon. Friend the Chief Secretary has already told us that further schemes of tax avoidance such as the commodity trading options which were started up will be closed, and closed retrospectively, I hope. I do not want any nonsense from those on the Treasury Bench about their not being able to make this retrospective beyond Budget day. The announcement was made well before Christmas. People knew that they were doing it and that if they were caught the loophole would be closed.
One of the tax brains who set up the George Wimpey rip-off, Mr. Godfrey


Bradman, said both in the interview in the Sunday Times and during the television programme to which I referred that every time the Inland Revenue became aware of such a scheme he knew that he would have to go away to think up another one, because he knew that the Inland Revenue would stop it. That is the argument why we should not take any notice of arguments in this House against retrospective legislation.
There are three areas, and I shall refer to one more before mentioning briefly some other aspects of the amendment not yet debated. This refers to the breed of accountants who specialise in tax laws. There are many of them. It is a big industry because the tax system is complicated and there is a large "gravy train" related to it. I can on this occasion speak with notes before me on the kind of information and advice given by people like Mr. I. P. A. Stitt, who, when he did this confidential course, was a senior partner in Arthur Andersen and Company, a firm of international accountants which does a lot of work for the Government and which has not kept off the gravy train, because it had some £300,000 worth of work during the penultimate financial year.
In his lecture on inter-company pricing and charges, at about this time last year, Mr. Stitt told companies how to operate transfer prices to ensure that their corporate tax liability was very low. On page 8 of his notes he gave this kind of advice, which I could not quote last time as I had left my briefcase elsewhere and was threatened with legal action if I spoke of this outside the House. This well-heeled accountant, who is feeding off the taxpayer through Government contracts, gives advice to big firms on how to cut their corporation tax. He said in paragraphs (c) and (d) of his notes that major companies should seek
to play off, wherever possible, the Inland Revenue against other United Kingdom or foreign Government Departments, for example, Customs, the Bank of England, the Department of Health and Social Security and the Price Commission … attempt to bring the Inland Revenue into conflict with an overseas tax authority in connection with the transfer pricing enquiry, e.g. the Internal Revenue Service of the United States.
Because our tax system is so complicated, not just because our tax rates are so high, such people are making a very fat living, giving advice, running courses

and setting up particular operations so that certain people do not have to pay their proper tax. The Inland Revenue has set up a special unit, under the Finance Acts of 1970 and 1976, to look into the problems. The last time I inquired into the result by means of a parliamentary Question, I was told that the unit had recovered £20 million.
This aspect must be looked at. It is not receiving sufficient attention from the Treasury Bench, and it will certainly not receive attention from the Conservative Party, inside or outside the House, because by and large it is their friends who are doing these tax avoidance schemes, as my right hon. Friend is well aware. I sent him a copy of Mr. Stitt's notes some time ago so that at least the Inland Revenue may know what advice is being given to people.

Mr. Fairgrieve: Before the hon. Gentleman leaves that point, I would ask him one question. In the complicated tax jungle that we have in this country today, is there anything wrong in accountants giving companies advice on how they may pay the minimum legal tax due under the law?

Mr. Rooker: The kind of things that I have been talking about are not illegal. It is a question of morality. If the public are told that the corporation tax rate is 52 per cent., quite rightly they are led to believe that 52 per cent. of company profits finds its way into the Treasury. Once one takes off the myriad allowances and corporation tax contributions, in percentage terms this is some 7 per cent. less of the total Government revenue than three or four years ago.
The simplest procedure of all, which was done by George Wimpey and was totally immoral, was to purchase a tax "fiddle" scheme for £2·8 million, which meant that that company did not have to pay its proper dues in corporation tax. Is the hon. Gentleman defending the morality of that? Is it Conservative Party policy to approve of such a scheme? I can tell him that one of his hon. Friends on his Front Bench attacked that scheme in a television programme and seemed to think that there was something very shady about it. He was put on the spot and he came up to the mark admirably in speaking on behalf of the Conservative Party. If the hon. Member for


Aberdeenshire, West (Mr. Fairgrieve) thinks that the Tory Party supports these schemes, he should talk to his hon. Friends outside.
Coming to the issue of the tax on low incomes, we are bound to take into account the disastrous effects of the tax system, which has rightly been referred to as an "engine of poverty". It has operated in that way over the last four or five years, particularly with the current and previous very high inflation rates; and the Treasury Bench did not take cognisance of it as it affected the low paid, who really got screwed and were pushed down and down so that it really did not pay many of them to go to work. This gives a minority of hon. Members opposite a weapon with which to beat the Government and to undermine the Welfare State.
The Supplementary Benefits Commission is certainly an arbiter in this. In its evidence to the Royal Commission on the Distribution of Wealth, alluded to in SBC "Notes and Views" of 8th August last year, two very important points were made which are worth putting on record in the light of changes in the Budget which nevertheless have already been brought about:
Any appreciable improvement in the supplementary benefits scale rates must be preceded by an improvement in other net disposable incomes of 'the working poor'"—
because that is what my hon. Friends and I have referred to in our amendment—
particularly through the more generous family support which child benefits and housing subsidies may provide, and through higher tax thresholds, higher minimum wages and more effective enforcement of Wages Council Orders.
The Supplementary Benefits Commission "Notes" also referred to a certain number of cases in which supplementary benefit equals or exceeds the recipient's potential earnings by saying:
The number of cases … is far less than is sometimes suggested, but there are many more cases in which an unemployed man returning to work could well be demoralised by the narrowness of the gap between society's assessment of his worth in and out of work.
That was said also during the Budget discussion last year, and I thought that there was hope for the future. That has been repeated in letters from the Treasury to many members of the public and cer-

tainly to many of my constituents, quoting the Chancellor of the Exchequer when people write to support the activities of my hon. Friend and myself in the Financial Committee.
The Chancellor said during his Budget speech that the highest priority for the future must be to raise the tax thresholds and, if circumstances permitted, to increase their level to the point where they stood clear of the levels of the main social security benefits. Recently I asked the Treasury whether it still stood by that as a priority. The answer I received was "Yes". It would be a gross error of judgment for the Chancellor of the Exchequer not to do so, bearing in mind that he has little money to spend anyway. I shall not talk in terms of £2 billion or £3 billion, but perhaps the hon. Member for Cornwall, North (Mr. Pardoe) will enlighten me.
We really cannot put figures to these equations, but I know the cost of indexing the threshold. The Chancellor of the Exchequer has said he has already done so and in October last year, in the Act on income tax personal reliefs, he actually brought forward his indexation provision which should operate in the next Budget. I do not know whether my right hon. Friend is precluded from going one step further and giving the tax thresholds the extra boost that they would need for a further rise of 12 per cent. or thereabouts, concomitant with last year's increase in the retail price index, which would take the tax thresholds above and well clear of the main supplementary benefit levels.
That is vitally important. To me it is a first priority, along with the increase in child benefit. I do not see how one can distinguish between the two. In the old days, when thresholds were raised the child tax allowance would have been raised as well. It would have been part of the Budget announcement. These days, however, there is a slight problem in that as far as DHSS Ministers are concerned the Treasury still holds the purse strings.
Hon. Members on both sides of the House have made the point that the effect on families over the last few years has been disastrous. The only way in which it can effectively be reversed is by a substantial increase in child benefit along with the raising of thresholds. Only after that action is taken will I then start to advocate and support with my vote a


reduced rate band. To get the record clear and to say that I am not prepared to be put on test about anything later in the year, let me say that only if that were done would I then push for the reduced rate band.
For someone on very low pay to get sucked into the tax system where his marginal rate is 34 per cent., it is no argument to say that every extra pound is to be taxed at 25 per cent. There is almost no difference for the low paid. It is only a few pence. But they are still in the tax system at a point at which they know that they may be better off not working, and all the pressure will be put upon them.
Therefore, we have to get that increase before we introduce the lower rate band. Only after the lower rate band has been introduced do we then start to talk of a decrease in the basic rate of income tax. It is the very last of the priorities. If my right hon. Friends on the Treasury Bench are in any doubt about this matter, let me tell them that the order in which we listed these proposals in our amendment was supposed to indicate priorities. It clearly states that only at the very end of the line would we advocate and support a reduction in the basic rate. All the other things must come first. The last point is referred to in the last part of the amendment:
there is no valid case for tax hand-outs to the rich.
I was disappointed with the speech of my right hon. Friend the Financial Secretary. I hope that Treasury Ministers will not make the sort of mistake that he made when this place gets sound broadcasting. My right hon. Friend talked as though he accepted what Opposition Members say when they say "The rich are badly hit. Everyone is paying 83 per cent. tax. My God, we must get that level cut." However, we ought to preface our remarks by saying that in order to pay 83 per cent. income tax one has to be earning over £400 a week. That is the message that must go out when the microphones here are switched on for the listening public. The public will be fed the argument that we must get the tax burden off the managers, otherwise there will be no more jobs. It must be made abundantly clear that in order to reach that tax threshold one must be earning well over £400 a week.
We have made our contribution to the rich in last year's Budget. I note that my right hon. Friend the Minister of State, Treasury nods. I shall give just one example. I asked a Question last August—it was answered only in letter form—about the total effect of all the Chancellor's changes on many different levels of income. I chose all sorts of levels of income, such as those of judges and admirals, and I chucked in a few ministerial levels, and Opposition levels, because we have to remember that the Leader of the Opposition is paid a salary from public funds.
The answers were very informative. I choose to cite just one of them. It is the average sort of figure that may be quoted by Opposition Members. It is of someone on a salary of £13,200. The figure relates to a married couple. This was before the changes last October. It was as a result of all the original Finance Act changes. Someone on a salary of £13,200 would have had a decrease in his income tax of £647. In my book, that amounts to £12 a week, in the pocket, net. That is the point to note.
In order to get that sort of increase in the pocket, someone earning £13,200 would have to have had an increase in gross salary of £2,158, simply because of the higher marginal rates of tax. That is equivalent to a gross increase in salary of 16 per cent. Therefore, the sort of person receiving £13,200 has already walked away with £12 a week extra in his pocket.
That happens to be a salary that is way above the average production manager's salary in industry. Opposition Members talk about salaries in manufacturing, salaries of the people who have to drive industry. They do not talk of the works manager and production manager levels and of very low salaries of £6,000, £7,000 and £8,000. It is very rare to find one up to £9,000 a year. One certainly does not see jobs advertised at £13,200 for the manager who is really at the sharp end of industry.

Mr. Higgins: Would the hon. Gentleman care to suggest what happens to the real income, allowing for inflation and tax, of the person at the level of income that he has mentioned? The hon. Gentleman ought to look at what has been happening in real terms and not just in money terms.

Mr. Rooker: I have taken one year. Everyone was affected by a rate of inflation of between 25 per cent. and 30 per cent. As I have already made clear, the poor got really screwed. They were paying a marginal rate, at one time, of 106 per cent. They were losing money by getting a £1 a week increase at work because they lost some benefits, such as free school meals, rent allowance and so on. They were then sucked into the tax system as well for a £1 a week increase in gross earnings. A man could be 6p a week worse off. That is a much higher marginal rate of tax than the 98 per cent. that is quoted.

Mr. Higgins: I appreciate the point that the hon. Member has made about the poverty trap, but he is switching his argument from percentages to absolute amounts and back again. If he is starting his argument by saying that it is an enormous absolute amount increase, in terms of what is happening to real incomes after tax and inflation he ought to revert to absolute amounts. In that case the reduction in a person's real income, after allowing for inflation and tax on income, is very great indeed.

Mr. Rooker: One could make the same argument about people on the lower levels. I was citing the effect of last year's Budget. I do not want to go over the background as to how real income has been affected over the last two years. I am saying that we have already given the rich a substantial tax hand-out. Someone on a salary of £13,200 walked away with £12 a week in his pocket. I said that, in order to obtain that as an increase in salary, he would have needed an increase of £40 a week, just over £2,000 a year, to get that amount clear after tax. The increase would he 16 per cent. That is somewhat above the percentage in relation to average industrial earnings of £80 a week quoted by the Chancellor.
Everyone is suffering from inflation. Richer people may or may not have suffered from it more than others, but that is not the point. The point is that they had a substantial net increase in their pockets after last year's Budget.

Mr. Higgins: Not in real terms.

Mr. Rooker: I shall not be fed by interventions. It would deprive some of

my hon. Friends of time in which to make their speeches, and some of them are prepared to debate these issues with the Tory Front Bench and with the Government Front Bench. Everyone has been affected by what the hon. Member for Worthing (Mr. Higgins) is seeking to imply. I have implied that richer people have not been so affected. I have chosen one example of someone who walked away with £12 a week or more. [HON. MEMBERS: "No."] He did. His tax liability was reduced by £647 a year. That is for a person receiving £13,200.
I have chosen that figure because it fits most closely the salary of the Leader of the Opposition. She gets £13,700. I am not making a party point. I have quoted figures from Cabinet salaries in the past. I say that if the cap fits, wear it, and that applies to both sides of the House and both Houses of Parliament right up to the Law Lords who walk away each year with £20,000. Their tax reductions have given them an extra £15 in the pocket each week. These factors must be taken into account.
The Government have made a commitment to increase tax thresholds and reduce taxes on the poor. By lifting the thresholds above the supplementary benefit level, they will be helping families and improving their position. This may mean taking unpleasant decisions about single people and some earned income allowances.
I read the Orange Paper from the Equal Opportunities Commission about the gross unfairness of the tax system on the women of this country. We have reached the point where, because of the creeping of the tax threshold to the State pension level, women between 60 and 64 who get a national insurance pension earned in their own right could be paying tax on the basic old-age pension. That position is grossly unfair. They do not obtain the benefit of the age allowance, which is really a retirement allowance. Had it not been for the upset and embarrassment that would have been caused, my hon. Friend the Member for Coventry, South-West (Mrs. Wise) and I, who caused the Government to reorganise £500 million of tax cuts in favour of the poor, would have pushed the amendments to the Finance Bill to help these women.
I hope that when the Chancellor announces his Budget he will make clear that we do not intend to operate a tax system that is as grossly unfair to women as it has been in the past.

6.52 p.m.

Mr. John Pardoe: The hon. Member for Birmingham, Perry Barr (Mr. Rooker) is magnificently constructive and infuriatingly wrong-headed, which is a better combination than very many right hon. and hon. Members.
In opening the debate the hon. and learned Member for Dover and Deal (Mr. Rees) did me the honour of quoting freely from my views on taxation. He did not distort my views at all. I stand by every word of criticism that I have made in the past about our taxation system—particularly the incidence of income tax. Our direct tax is a prison in which the entreprenurial and wealth-creating spirit of the British people lies wasting in chains.
Last week I thought that it would be impossible for the Conservative Opposition to produce a motion for which I would not have to vote, but they must have burned the midnight oil trying to do so, because they have succeeded. They have produced a nonsense of a motion, in its first phrase in the first line. The Government motion is not free of nonsense either, in its first line. Of course it depends on what one means by "making a start". One has to look with a fiscal microscope for any start that has been made in shifting the burden of taxation from income to expenditure. I want rather more than what the Government call a start.
Returning to the Conservative motion, exactly what are excessive amounts of taxation? What standards of comparison are they using? Is there a proportion of GNP in taxation that is bad and a proportion that is good? At what stage do we reach it? Is there an international comparison and, if so, with which countries do we compare ourselves? In making international comparisons one is always behind the times. One can only quote figures of a few years ago. In the December 1975 issue of Economic Trends, table 113 shows an international league of 10 in which we are sixth in relation to the proportion of GNP going in tax. This includes social security contributions. In

other words, we are about the middle of the industrial league table, and that is about the right place for us at our present stage of development.
It is plainly misleading to pretend that the fault of the British tax system is over-taxation. If one goes on pretending that, it leads to all manner of nonsensical conclusions. I believe that this conclusion will be drawn by the Conservatives now, just as they drew it in the period before 1970. They got their tax wrong then and they have got it wrong now.
In any case, if it is true that we are over-taxed as a nation, it is incumbent upon Conservatives to spell out the way in which they would reduce the total level of taxation. We never get any such statements from the Opposition Front Bench. In order to reduce the total taxation the Opposition must have specific programmes for reducing expenditure. What is it that the Government do now that will not be done under the Conservatives? We will never get an answer to that question from the Tories.
The reason is that every member of the Shadow Administration is generally in favour of cutting public expenditure, but at the same time each one depends on making promises to increase it. [HON. MEMBERS: "No."] Oh, yes. Take, for example, the Shadow Education Minister. I well remember his calling on the hon. Member for Eton and Slough (Miss Lestor) to resign as a junior Minister at the Department of Education because of cuts that the Government had forced on that Department. He was deeply critical of the cuts, and recently has advocated increased expenditure on education, and particularly on the arts.
Then there is the Shadow Health Minister. Is he really in the business of saying that the country can afford to make massive cuts in expenditure on the Health Service? Of course not. He is deeply critical of the cuts and of the level of services.
Take also the Opposition approach to social security provisions. We find that when the Government delayed the announcement of the increase that they intended to make in social security benefits—these are made in November, but announced in advance—the Shadow Health Minister made a critical attack on the Government and implied that the


reason for the delay was that the Government were going back on their commitment to index the benefits.
Some Member of the Shadow Administration must tell the House quite clearly that he intends to cut expenditure. If we know what it is that will be cut we shall be able to say how far that will go towards financing cuts in total taxation. The list could continue. It could extend to defence and the range of items on which the Tory Party is committeed to spend money.

Mr. Tim Sainsbury: May I put two points to the hon. Gentleman? First, what is the Liberal Party's attitude to subject of pay beds? Do the Liberals want to increase the amount of public expenditure on health by cutting pay beds? Secondly, the hon. Gentleman did not mention the shadow Secretary of State for the Environment, who, by getting rid of the Community Land Act, will save a great deal of public expenditure. What is the Liberal Party's attitude to that matter?

Mr. Pardoe: In 1970 there was much talk from the Conservatives about cutting taxation and about expenditure being too high. But when they came to office, what did they do? They operated through "the snatcher" and cut children's milk. That was a saving of a mere £7 million. At a quick calculation I estimate that in respect of pay beds the hon. Gentleman is speaking of a sum of £20 million. That figure, revalorised, amounts to about £7 million. It may not be quite that figure, but not much more will be saved by that course. In other words, the sum will amount only to peanuts. It is nonsense to believe that that sort of sum will do anything to encourage the entrepreneurs and those who create the wealth in our community. It is hypocritical hooey to talk about pay beds and other fringe activities in this context.

Mr. Nick Budgen: I believe that the hon. Gentleman's general proposition is right and that there will have to be substantial cuts in public expenditure before there can be tax cuts across the board. However, he does not deal with the substantial amount of new tax that will come from North Sea oil.

Mr. Pardoe: I thought we would get to that subject. The English are extraordinary. Unlike the Scots, the Cornish and the Welsh, they believe that God is an Englishman and that He set us down on this island built on coal and surrounded by a sea that is full of delicious fish, when that coal has been taken over by Arthur Scargill and our fish has all gone to Iceland. In some people's eyes, He said "Let there be oil", and this miraculous brown liquid started to flow into Conservative coffers. They envisage that future Conservative Chancellors will be able to dole out more of this brown gold to British taxpayers.
That view is absolute nonsense. The hon. Gentleman should read the review produced by Paul Nield, commissioned by Phillips and Drew. He will then see that he should approach very cautiously the subject of our gaining a great deal of revenue from the North Sea. The money will not be there to fund these massive cuts in taxation which the hon. Gentleman and I both wish to see.
There is another matter that should be mentioned besides the subject of North Sea oil, and that is the borrowing requirement. I am in favour of increasing the borrowing requirement. I believe that the Government have got the matter wrong. I believe that they have made a mistake and have made expenditure cuts which they did not intend to make. In other words, they have overcut the borrowing requirement. That figure has come out very much lower than the Government expected.
In 1973 the borrowing requirement was 6·6 per cent. of GDP. In 1976 it was 8·6 per cent.; in the first three quarters of 1977 it went down to 4·2 per cent. I believe that with Western economies in their present state that figure is too low and should be raised. However, it will not produce the money that is required to make the necessary changes.
The major matter that is wrong with our system is not over-taxation but over-dependence on personal incomes. In 1960, taking the figure of taxes on income and taxes on expenditure given in the financial statistics table, we see that the figure in respect of taxes on income amounted to 51 per cent. In 1970 that figure rose to 53 per cent., in 1973 to 55 per cent., and in 1976 to 60 per cent. It is that


trend which has gone wrong and is causing the stresses and strains in our taxation system.
It is a very different picture in other countries. For instance, in West Germany a figure of 33 per cent. is taken in total tax revenue and income tax. In Italy the figure is 21 per cent., and in France 20 per cent. That seems to me to be a somewhat more wholesome balance.
I part company with the hon. Member for Perry Barr when he says that he believes that tax is too high only at the lower levels of income. I believe that taxation is too high at every level of income. It is at every level that we must make an impact, and we must do so quickly.
What must be done about the situation? We need major reforms and major reductions. We cannot afford to be timid. Our eventual aim is to bring down the standard rate of income tax to 20p in the pound. On current values it was 30p in the pound when the Conservatives left office and it is now 34p in the pound. I would regard any action aimed at reducing the figure to 30 in the pound as far too timid because such a figure would do nothing to stimulate the entrepreneur or to create wealth in our community.
The threshold has been set well above the supplementary benefit level. On that matter I agree wholeheartedly with the hon. Member for Perry Barr. The cost of indexing the threshold is very high indeed. If we examine the situation in 1973 we see that the single person's allowance was then £595. That would have to be increased by 113 per cent. to bring it up to current values, which would take the figure to £1,268. The current existing allowance is £945.
I quote those figures because it seemed right to obtain the figure of supplementary benefit. Therefore, this appears to be a reasonable figure to take as a standard. We should be moving somewhere in that region because enormous costs have to be met.

Mr. Higgins: Perhaps the hon. Gentleman should not merely say that the costs are enormous. Perhaps he can say, in terms of the threshold, what a cut in the standard rate to 20 per cent. would mean.

Mr. Pardoe: I shall come to that matter. However, perhaps I can give the hon. Gentleman the threshold figure. One can obtain this information. It is not Government information, but it can be obtained by any reasonable economist or mathematician. That counts me out of the exercise, because I rely on other calculating machines than my own. An indexed scheme showing a person's allowance to April 1973 will bring the figure to £1,268, and that would mean a total figure of £1,000 million. If one wanted to go in for the whole range, the figure would be about £1,500 million or £1,600 million in personal allowances. I shall come to the standard rate in a moment, because I wish to deploy that argument rather differently.
I wish now to deal with the problem of child benefit and child tax allowance. I see no reason to delay the phasing out of tax allowances until April 1979. We could phase it out in April 1978. I believe that that would be a far better move. If we were to decide to make a change in the standard rate, I am sure that the hon. Member for Perry Barr would immediately say that a substantial problem would be created at the lower levels. Therefore, we must deal with the problem by increasing child benefits. In other words, it is better to deal with the proverty problem through direct grants than by fiddling with the tax system. I accept that there will have to be a switch, and I hope that will happen.
I must tell the hon. Member for Perry Barr that I believe the major stumbling block will be the trade union movement. It believes that it would be wrong to make this great switch of money now. It believes that it would be difficult for its members if we immediately made the switch from the pocket of the man to the purse of the women. I hope that people in the trade union movement will realise that they are being used as a stumbling block and will speak out if they disagree with that position.

Mr. Peter Bottomley: What possible evidence is there for the hon. Gentleman's saying that the TUC does not want this change? The Government used the trade unions as an excuse when the TUC had not even been consulted about the postponement of the child benefit scheme.

Mr. Pardoe: I have said what I have said. If the TUC denies it, I shall be the most delighted hon. Member in the House.

Mr. Rooker: What on earth does the hon. Gentleman think the row was about when the Cabinet documents were leaked? The Government were caught red-handed telling the PLP that it could not do this because the TUC was opposed to it and telling the TUC that the PLP would not stand for it. This is open knowledge. It is what the row about the disclosure of the documents by Frank Field was all about. There is no evidence that the TUC is opposed to such a transfer.

Mr. Pardoe: I am delighted by the row that I have created. That was precisely what I intended. I hope that we shall now get a denial from the TUC. The Government will then know what to do and we can have the change-over in 1978. We shall have won the argument and used Parliament for one of its most important purposes—to change the mind of the Government. I regard the child benefit scheme as one of the highest priorities for increased public expenditure.
Last year, I proposed an amendment to the Finance Bill to introduce a lower rate band in the income tax system. It is better than nothing, but it is administratively complicated and very expensive and I think that we should go for a much lower standard rate, by which I mean 25 per cent. If we came down to near 25 per cent. as a standard rate, we would not need to worry about the high level at which people enter the system. In terms of administration and cost, it would be better to do that.
I have said that such a move would require huge sums. We would need between £4 billion and £5 billion to get the standard rate down to 25 per cent. Where would the money come from? I have already suggested that the borrowing requirement is too low. I was interested to note that the Treasury, after much prodding, has at last put out some figures on a full employment budget in this month's economic progress report. It refers to a table on page 5 and says:
The figures in the table suggest that if the level of activity in that year had been consistent with an unemployment rate of 3 per cent., the public sector would have been

around £3 billion less or about two-thirds of the deficit of £8·3 billion actually recorded.
That is a very substantial amount, and that figure must be taken into account in any assessment of the borrowing requirement that Britain could tolerate in 1978.
Most of the money will have to come from taxes on spending. VAT is not as broadly based an expenditure tax as many thought it would be in the initial planning stages. We have got ourselves, largely for historical reasons, a tax which exempts about 50 per cent. of all family expenditure, including food, children's clothes, fuel and light. I do not think that anyone would easily advocate that we should insert any of those things into the coverage of VAT.
We must accept the limitations of VAT and the fact that it does not raise a great deal of revenue. Simply standardising the rate on present goods at 10 per cent. would bring us £700 million. That does not take us far, but it takes us some of the way. We could find at least another £500 million or £600 million by the revalorisation of all duties—

Mr. Rooker: rose—

Mr. Pardoe: —with the exception of petrol. I got that in quicker than the hon. Member for Perry Barr. I knew that it was coming. Petrol will not be revalorised.

Mr. Budgen: Why not?

Mr. Rooker: Because the Liberals say so.

Mr. Pardoe: The hon. Member for Perry Barr said it; I did not.
If we revalorise the other duties, particularly those on tobacco, cigarettes and drinks, it will bring in about £500 million or £600 million. That should be done. However, there must be a source of substantially greater amounts of money, and I put it to the House that these can come only from the source used in other major European industrialised countries—the payroll tax.
Taxation of the corporate sector in Britain is ludicrously low in its totality compared with that in other industrial countries. I understand why. The profitability of British companies has been extremely low, there are massive allowances against corporation tax, and stock


relief has virtually decimated the yield of corporation tax. The only other major taxation of the corporate sector comes from the payroll tax, and it is very much higher in the rest of Europe than in Britain. For example, British employers pay 11 per cent. or 12 per cent. of their wage bills in payroll tax, but the German employer pays 15 per cent. or 16 per cent., the French employer well over 20 per cent. and the Italian employer 30 per cent.

Mr. Budgen: Does the hon. Gentleman agree that a payroll tax would be yet another disincentive to employers and that the other countries to which he has referred do not have the whole corpus of legislation that has been put on the statute book, with the hon. Gentleman's approval, recently and is already a massive disincentive?

Mr. Pardoe: It is a demonstration of unbelievable ignorance for anyone who takes an interest in economic matters to try to delude the House into believing that the legislative burdens suffered by British employers are greater than those suffered by employers in other industrial countries. Anyone with experience of trading or doing business with other countries knows that it is as difficult to sack a Swiss employee as it is to dismiss a British employee and that the process is almost as difficult in Germany. It is getting more and more difficult around the world, and it is a good thing that that should be so. There should be no going back on the Employment Protection Act. I do not believe that it is the reason for the malaise of British manufacturing industry.
A 1½ per cent. increase in the payroll tax would bring in well over £1,000 million in a tax year and would bridge the gap. Employers are engaged in a massive row with the Government over their determination to insert clauses into public service contracts limiting employers to giving their employees wage increases of 10 per cent.
The employers cannot have it both ways. If they cannot afford to pay the Government an extra 1½ per cent. on the payroll tax, they cannot afford to pay their employees more than a 10 per cent. increase in wages. If it were not for the Government's guidelines, we should be getting wage increases of 15 per cent. to

20 per cent. or more. That puts the whole question in context. That is where most of the money must come from. I see no alternative to raising it that way.
I say to big and small employers that if one believes, as I do, that income tax is the greatest disincentive to the wealth-creating process in this country, we have to argue honestly and show the financing of substantial income tax reductions in an economic context. We have done that and we are prepared to spell out the cost of reducing income tax. It is essential that this should be done and that we are prepared to say to employers that the benefits that we shall offer to them by making a substantial reduction in income tax are huge and enormous by comparison with the small sacrifice that we are asking them to make in terms of increased company taxation.

7.20 p.m.

Mrs. Audrey Wise: When my hon. Friend and I tabled the amendment which has unfortunately not been called for debate, we deliberately commenced with a reference to expenditure on the essential public services, the services that the people want and expect and are right to want and expect. Those are the services that Opposition Members are apparently satisfied to see starved of essential funds. We commenced our amendment with a reference to public spending because we believe that the raising of revenue and the spending of revenue need to be discussed together. We are opposed to the artificial separation of the two factors.
We are also deeply opposed to the method which is used by Opposition Members, who suggest to the people that they can have reductions in taxation and more money in their pockets—that is, more money in everybody's pocket, from top to bottom, from the highest earners and owners of the greatest wealth right through to the lowest paid—and at the same time have adequate services. Life is not like that, and my hon. Friends and I make it clear in our amendment where our priorities lie.
It happens that in Coventry this very evening the community health council will be discussing correspondence it has received from the BMA, in which is enclosed a letter from my right hon. Friend the Secretary of State for Social


Services. My right hon. Friend makes it clear that he realises that the National Health Service is unable at present to meet the people's expectations and that the doctors and area health authorities have extremely difficult decisions to make. In reaching some decisions, it is necessary for those concerned to play God. In some instances decisions have to be made which mean that people will die before the Health Service gets round to treating them. In such circumstances, my hon. Friends and I believe that it is right to declare loud and clear that expenditure on social services, the Health Service, housing and the like has to be a priority.
As my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) has said, we have made no attempt to quantify the claims that we are making on the nation's resources, and that is justifiable in such an amendment. But, at a time when the lowest paid have had taxation bearing upon them very heavily, it is also justifiable that we look to the Treasury, with a Labour Chancellor, to ensure that whatever tax cuts can be afforded will go into the pockets of those who need them the most. In addition, my hon. Friends and I believe that the time has come for an injection into the economy, for a reflationary package and we believe that that has to affect both the public services and tax on low incomes.
We are told from the Opposition Benches, including, I am sorry to say, the Liberal Bench, that we lack the entrepreneurial spirit. It is said that it is being taxed out of existence by our heavy income tax. I find that difficult to understand. The hon. Member for Worthing (Mr. Higgins) seems to think that those on high incomes have some divine right, because they have had a larger share of the nation's wealth, to continue having a disproportionately large share of the nation's wealth. Most Labour Members deny that absolutely. The idea that we have difficulties in our economy because top managers or middle managers are being ground down by taxation is total rubbish. It would reflect badly on top and middle managers if that were true, if they were withholding part of their talent and effort because they were greedy for more cash or tax relief.

Mr. Paul Hawkins: I entirely agree with the hon. Lady's comments about the terrible state of the National Health Service, with consultants not being able to see people for many months and even years. Does she agree that most of the cause lies with the high personal taxation that has driven abroad many of the young doctors who would have stayed in the hospitals to give the service and the attention that is now lacking? Surely that is a reason for wishing to reduce high personal taxation.

Mrs. Wise: If some doctors who are trained at public expense are not prepared to stay and treat the British people, that reflects badly on those doctors, but it does not apply to the whole of the medical profession. Conservative Members are always keen to call on the low paid to work for the good of their souls, but they seem to look with positive favour on those who would take every advantage from this country only to leave it at their own convenience for what they see as greener pastures overseas. I have no time for such people, and I do not believe that we rely upon them.
Part of the difficulty in the Health Service also arises from consultants who will make people wait for years before they can be seen in the National Health Service, although they say "I shall see you next week" or "I shall see you in a fortnight's time" if the patient is 'prepared to attend them privately. That is another factor to be taken into account. Nevertheless, there is no doubt that the NHS needs a considerable injection of funds. We have to replace old and neglected hospitals, for example.
I return to the entrepreneurial spirit which Opposition Members seem to think is being crushed out of top and middle managers. I suppose that we had entrepreneurial spirit in the 1920s and 1930s when taxation was much lower. I suppose that we had that spirit then and that everything was lovely. Was it lovely? I suppose that we had entrepreneurial spirit when taxation was even lower in Victoria's heyday, when wealth was ground out from the very blood and bones of the poor. I suppose that one's attitude depends greatly on a plain and straight forward understanding of class position.
My interest is firmly in ensuring that the vast majority who contribute to the


best of their ability to earning our national wealth receive the benefit of any tax concessions that can be made.

Mr. Budgen: If we accept the hon. Lady's argument that she is in the House, as she has often said, to represent the views and interests of ordinary working-class people, is it not right that ordinary working-class people want to be employed? Is it not right that in future they will be employed mainly because entrepreneurs have seen profitable ways of providing employment for them?

Mrs. Wise: The hon. Gentleman does not seem to live in the age of the multinationals in which the rest of us have to live. In talking of the individual entrepreneur, the hon. Gentleman is indulging in romance. We live in the days of huge monopolies which wield enormous decision-making power. On the whole, they wield it not in the interests of ordinary people but with complete disregard of the massive talent, interest and capacity that exists throughout the population, not only in the persons of top managers. If, for example, the Opposition took the interest that we take in the plans of the Lucas aerospace workers, they would understand where and why talent is wasted.

Mr. Budgen: Is the House to assume that the hon. Lady is suggesting that all employment in future should come from the State sector?

Mrs. Wise: I assure the hon. Gentleman that I am no lover of excessive State power. The Lucas aerospace workers' plan is not about State power. I do not believe in dispossessing the multinationals in order to have an all-powerful State. I believe in finding a structure of society which allows ordinary people to have more control over their own lives.

Mr. Rooker: That is called freedom.

Mrs. Wise: That is not the kind of society which the hon. Member for Wolverhampton, South-West (Mr. Budgen) wants. We are engaged in a debate on taxation. I should like to educate the Opposition on how to harness the talents of working people, but this is not the time. I am sure that I should be called to order by you, Mr. Deputy Speaker, if I were to do that. If the Opposition would have a Supply Day on,

for example, the need to encourage workers' co-operatives or some such subject, we could explore this matter to our hearts' content.
I do not believe that there is an argument for tax concessions throughout every level of the population. Those who pay a marginal rate of 83 per cent., because their taxable income is more than £21,000, are not in dire need of help from the community at large.
That brings me to a consideration of the precise form which tax concessions should take. As long as we have a tax threshold which overlaps with social benefits, such money as is available for tax concessions would best be utilised in raising the tax threshold beyond that overlap. Last year we made enormous strides in that direction. The process which was started in Committee on the Finance Bill was admirably continued by my right hon. Friend the Chancellor of the Exchequer in October when he uroceeded to make further increases in the tax threshold. We can now say that, broadly speaking, the tax threshold is not below the supplementary benefit level. That was a considerable and important advance.
However, I urge my right hon. Friends, when considering this matter, to take into account the relationship between the tax threshold and family income supplement. As long as working people pay income tax with one hand and receive family income supplement with the other, they will regard that as wasteful in the extreme, incomprehensible and stupid. They will be right. Therefore, I urge that the first priority for tax concessions should be to raise the tax threshold at least to the extent where it does not overlap with family income supplement.
We have referred to child benefit in our amendment. We have done that deliberately and linked it with tax cuts. We know that there is now a mechanism for family support technically different form tax allowances. The danger—the unexpected danger when we passed with wholehearted enthusiasm the Child Benefit Bill—is that it has become all too clear that, while it was exceedingly easy for the Chancellor of the Exchequer, if so minded, to raise child tax allowances without the constraints which apply to increases in public expenditure, this is


not so for child benefit. Simply refraining from levying tax is not regarded as being in the same category as spending tax which has already been raised. Therefore, we have the irony of money being expended on child tax allowances without public expenditure constraints, whereas the same amount, if allocated to child benefit, would encounter enormous hurdles.
We have an accounting system which seems to put senseless barriers in the way of increasing child benefit. I do not think that any of my hon. Friends will accept a statement from the Chancellor of the Exchequer that he has had to increase the married couple's allowance because he is now unable to help families through child tax allowance. It is imperative that adequate and generous amounts should be devoted to increased family support. That can be done only through child benefit. It is for the Treasury to do it.
We shall not be minded to accept excuses about the state of the contingency fund. People might from time to time accept that the country cannot afford certain things, but they will not and should not accept the notion that the country can afford but cannot arrange its bookkeeping so as to pay the benefit in the most sensible fashion. Therefore, child benefit must become inextricably linked in the Treasury's mind with the concept of tax forgone. If not, we shall continue to flounder on the subject of child support with dire consequences when we have to face the electorate. I urge this matter most strenuously on the Treasury Bench.
We have referred in the amendment to an intermediate rate band. We are aware that the TUC favours a lower rate band, and we are certainly not opposed to it. We would give priority to the raising of the threshold and to an increase in child benefit. But there is a strong argument for saying that it is wrong for people to come into the tax band at 34 per cent.
I do not accept the rash statement from the Liberal Bench that there is a possibiuity of reducing the standard rate of tax sufficient to give marked improvements to those at the lower end. A reduce-

tion in the standard rate of tax would simply be a way of giving proportionately more to the better off. I should reject that completely.
My hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) posed to the Opposition Front Bench the question of the poverty trap. The Opposition signally failed to answer that question. However, it has been answered in our amendment and in my remarks relating to the overlap with FIS and social benefits. We on these Benches are prepared to grapple with the problem of the poverty trap. The Opposition have clearly demonstrated their incapacity and unwillingness to grapple with the problem of the poverty trap. Despite being twice challenged, the Opposition Front Bench spokesman contented himself with a weak and obscure reference to indexation, indicating that it was sufficient that personal tax allowances at the lower end were indexed. The hon. and learned Member for Dover and Deal (Mr. Rees) sought to take credit for that improvement in last year's Finance Bill. Mistakenly, he assured us that his hon. Friends had been fighting for years for such indexation of personal tax allowances. One would have thought that there had never been a Conservative Government in power.
When it comes to measures which proportionally give more help to the lowest paid, the Opposition are apt to find their enthusiasm waning. Simply by the foresight of my hon. Friend the Member for Perry Barr and myself in tabling the indexation amendment twice in slightly different terms did that provision come about. The first time that the suggestion was put before the Committee, so enthusiastic were the Opposition that they could not even muster all their Members to support it. They had someone locked out. Such carelessness, or was it lack of enthusiasm? Only because we tabled the amendment twice was the situation redeemed.
It ill becomes the Opposition to boast about their concern for the low paid in view of their general record and their total unwillingness to specify the way in which they would deal with the poverty trap. They are unwilling to commit themselves to sharing the wealth of the country fairly.
It is not possible to maintain good public services, give the poor a fair share of the wealth they help to create and at the same time protect the riches of the rich. One knows what the Opposition would choose if they were faced with the choice. They would choose to defend the position of the privileged and wealth in our society and to sugar that with the implication that it is only by defending the wealthy and priveleged that there will be the smallest crumb left for working people. We are supposed to be so grateful for their efforts at making money for themselves that we say that top priority must be given to preserving their position so that the privileged will then be good enough to employ the rest of the population and provide it with some semblance of civilised life.
That is not our philosophy. It is not the philosophy which we expect to see reflected in the next Budget. In view of the statements that have been made about improvements in the state of the economy, we look forward to some real improvement for working people both in terms of the standard of public services and in tax concessions. We shall look with favour on such concessions but with great disfavour if any concessions are made to the Conservatives' philosophy.

7.45 p.m.

Mr. Terence Higgins: The late Iain Macleod, who produced many memorable phrases, had one of which he was particularly fond, not because of its witticism but because of its truth. He said that Socialist Governments increased taxation and Conservative Governments cut it. As a statement of fact that is something which is clear if one compares the records of both Conservative and Labour Governments.
I should like to take up a number of points that have been made by the Financial Secretary and the hon. Members for Birmingham, Perry Barr (Mr. Rooker) and for Coventry, South-West (Mrs. Wise) before turning to the main argument. I agreed with the hon. Member for Coventry, South-West when she said that the speech by the Liberal Party spokesman was extremely rash. We are used to rash statements from the Liberal Party. However, they are not likely to have to fulfil their rash promises. After the Lib-Lab pact that will be even more true in the future.
I absolutely reject the hon. Lady's statement about my party's concern for the poor, and in particular what she said about the poverty trap. Had we not lost the election in February 1974 we should have legislated in the next Finance Bill for a tax credit scheme which would have done more to remove the poverty trap, once for all, than anything that this Government have done. Similarly, I reject the view that we did not do a great deal to help the lowest-paid. One has only to look at the record to see what we did.
I wish to take up some of the points made by the Financial Secretary and I hope that the Minister of State will convey them to him. The Financial Secretary referred—he seemed to have a desire to go back into the past—to the situation which the present Government inherited when they came to office in 1974. I am glad to see that the Financial Secretary has returned to the Chamber. It is important to make comparisons not between one moment in time and another but over a period of time involving two Governments. If one examines the figures one finds that the main economic indicators look different now, in terms of real income. We have had complete stagnation for four years. Under the previous Conservative Government we had a record improvement in the real standard of living.
The unemployment record of this Government, at its peak, is more than 50 per cent. above what it was under the Conservatives. The cost of living comparisons are remarkable. The Financial Secretary quoted curious statistics, which I do not have before me. I was surprised by them, because if one takes the year-on-year figures they are: 1971, 9·4 per cent.; 1972, 7·1 per cent.; and 1973, 9·1 per cent. If one looks at the sequence for the following years one finds that the figures are 16 per cent.; 24·2 per cent. and 16·5 per cent. I am surprised that the Financial Secretary should think that there is anything to be gained from making the comparisons that he made.
When referring to the question whether the problems which we have faced since February 1974 were due to excessive increases in the money supply the Financial Secretary overlooked the fact that in October of that year we were assured by the present Chancellor of the


Exchequer that inflation was under control. Therefore, the Financial Secretary is stopped from arguing that the problems which we have faced since then have been due to that increase.
I sought to analyse the effects of the money supply increase in The Sunday Times of 11th November last in a way which no opportunity is provided in the House. When I am quoting the figures I hope that the Financial Secretary will look at the figures in "Greenwell's Bulletin" for February 1978, because it is a matter for some concern. This suggests that the percentage increase, at least on the last month, not allowing for increases in building society deposits, is very similar to the figures that he quoted for our last period of office. If he cares to look at the diagram for the increase in M3, he will see that that monthly figure is not vastly different, in terms of the rate of increase, from the figure when we left office.
I do not say that this is necessarily a significant comparison to make, because it takes the figure at a certain moment in time.

Mr. Budgen: Does my hon. Friend recollect that when these figures were announced the Minister of State himself commented on them to the Press and, as I recall, made it clear that the Government were going to get the money supply figures down within the 13 per cent. constraint?

Mr. Higgins: I understand that point. It is the main issue that I want to deal with in my speech, but I have one or two preliminary remarks to make about the structure of taxation before I come to that.
If one considers the end of our period of office and the beginning of that of the Government it is necessary to remember one necessary element, namely, that the danger that the stop that took place in the spring and summer of 1974 was taken by industry in particular and those concerned with investment decisions as a stop of the traditional sort. I do not believe that that is so, I believe that it was due to the oil crisis and the effects of the miners' strike. Hon. Members on both sides of the House do themselves no service if they believe that stops of that sort are inevitable, because if they do that

they may formulate policy in the wrong way for the future.
My final point on that aspect of the Financial Secretary's speech is that the inflation from which we suffered from October 1974 on was due to a tremendous extent to the wild wage explosion which the Labour Government permitted to take place on their coming into office, and particularly between the two elections in 1974, when there was no need for them to do that. If they had taken the correct action and if the present Leader of the House had not extended to surface workers the excessive wage claim settlement by the miners, with all the repercussions that that involved, the situation would have been a great deal better than it was. We are still suffering from that gross irresponsibility by the Government.
I want to turn now to one or two aspects of taxation, and in particular its structure. It is right that we should get back to a single rate of VAT, and I believe that the 10 per cent. rate that we originally introduced has a tremendous amount to recommend it. It is simple and furthermore it would give the Chancellor more scope for reducing direct taxation in the Budget. The hon, Member for Perry Barr surprised me, because he seemed to take the case of a particular individual with an income of about £13,000, allow for a change in his income and tax, and then make no allowance for the effect of inflation on the rest of his income. In absolute terms that would substantially reduce the real figure.
I am surprised that there has been no reference by the Financial Secretary or anyone else to Professor Meade's committee dealing with a change in the taxation system. Perhaps the Minister of State will refer to it later. I had the advantage of attending the professor's first lectures when he became professor of political economy at Cambridge. One cannot dispute the record of his analysis and the interest which the structure generates from an academic point of view. Although there are advantages in improving the position of the Stock Exchange and the mobility of capital, I have considerable doubts about the way in which Professor Meade seems to envisage exchange control as a permanent feature of our economy. The prospect of a planned 10-year period of tax reform is not one that I view with a great deal of


equanimity. I doubt whether the Financial Secretary would disagree with me.
Looking at the overall structure, however I think that we can all agree on the paramount need to reduce direct taxation. I was surprised that there was no reference by the Minister in his opening remarks to the successful CBI conference which I attended as a delegate a few months ago, or to the pleas by the CBI for a reduction in the level of direct taxation, particularly for middle management, where differentials have been squeezed disastrously. Even the hon. Member for Coventry, South-West would be prepared to accept that this might have serious effects on the general level of incentive for management and the carrying of responsibility
I turn now to the more technical question of what scope there is for tax reductions. I have suggested that a change in the VAT rate should give more scope for dealing with direct taxation, but we have to consider carefully the high level of unemployment�žI think everyone will agree that it is unacceptably high�žand the waste of resources that that involves, and the danger of a resurgence of inflation, which in time would endanger employment even more.
I believe that a difficult technical debate has been taking place between the so-called monetarists on the one hand and the so-called neo-Keynesians on the other. It is puzzling that so many of those engaged in this debate seem unable to understand�žI think that Patrick Hutber, in the Sunday Telegraph is a classic case�žthat it may be possible to use the two methods to fight inflation and reduce unemployment and even to raise the general standard of living. I consider myself, matters. I have always believed that both monetary and fiscal policy are useful tools for helping to manage the economy. It is on that point that I want my concluding remarks.
It seems that in this technical debate a false dichotomy has been created which is crucial to our management of the economy. False dichotomies have existed between those who draw a sharp distinction between monetary policy and demand management. Both of those

dichotomies are extremely dangerous if we are to get the right answer and establish what scope there is for reducing taxation. This is, after all a, crucial question at present. I disregard completely the rash and wild statement of the Liberal spokesman in this respect.
Both monetary and incomes policies have a role to play but it all depends on what is meant by "incomes policy". I feel that there is no way in which one can govern and run the British economy without having an incomes policy for the public sector, including the nationalised industries. That is so whatever one may say about free collective bargaining, and that can mean a great many different things, as we all know. But it is essential that the Government should take a lead in setting the level of pay settlements, preferably by the system of de-escalation employed by the Conservative Government, which reduced the rate of wage and price inflation by more than half over the first 11 month that we were in office. If one does that, it goes hand in hand with sensible fiscal and monetary policy, and one needs to use all three if one is to succeed.
I accept that if the present Government had not taken the line they did, after the wild wage explosion when they came into office we would long since have been in a quite disastrous situation. In spite of the stringent monetary policy that the Government have been pursuing in recent month, at the instigation particularly of the IMF I do not believe that that policy alone would have been sufficient to reduce the level of wage claims in a number of specific cases in the public sector where it has been necessary for the Government to stand firm. The Government have a responsibility to stand firm, though I do not accept the constitutional impropriety of the present system of black lists.
I still believe that it is wrong that in some areas, such as the hotel industry, the Government should have allowed wage increases of between 15 per cent. and 19½ per cent. That is completely unfair. The monetary and income policy side taken together give scope for sensible management of the economy.
This brings me to the other dichotomy, between monetary policy and demand management. Here the matter becomes rather more technical and raise the


extremely important question of when it is safe to reflate. In some quarters "reflation" has become something of a dirty word, and synonymous with inflation. That is a dangerous idea. It is dangerous for us to get into this semantic jungle.
I do not believe that reflation is necessarily identical with inflation. There are differences between the situation with regard to supply and demand—I have great faith in supply and demand—in an individual market and supply and demand in the economy as a whole. If there is excess capacity in the economy as a whole and one increases aggregate demand, there is initially an increase in output rather than in prices. Gradually both go up together, and finally prices alone go up. This means that there is some scope for reflation in certain circumstances. The crucial question now is whether the circumstances are such that there is that scope.
Here we need to rethink our views about economic management. I was very impressed by an article by Mr. David Kern some while ago, in the National Westminster Review, headed:
An assessment of Britain's medium-term financial prospects".
Mr. Kern suggested that we should have to accept quite explicitly that
the existence or otherwise of spare physical capacity, however significant at the level of the industrial plant or even the industrial sector, cannot be a useful operational concept against which to formulate national policies.
He also suggested that in a sense there was some kind of monetary sub-ceiling, below the capacity ceiling, through which it was dangerous for one to go.
If that is so, we must consider what would be the effect of tax reductions on the public sector borrowing requirement and, in turn, on the money supply. What worries me is that during the past four years we have had a virtual stagnation in GNP and presumably—although it is always difficult to establish this—a significant increase in productive potential within the economy. Therefore, the question is whether it is safe for the Chancellor to reflate without running the danger of inflation and unemployment again, whether a reduction in taxation of the order that has been suggested—of about £1.500 million, which would virtu-

ally take us back to the position of about a year ago, allowing for fiscal drag—would run us through the monetary guidelines that have been laid down.
If it is at about that point that we run through the monetary guidelines, we are effectively saying that the limits, because of the restraints on the money supply that the Government have annouced, are such that there is no prospect of reducing the level of unemployment below present levels and no real prospect of achieving further economic growth in real terms. I hope that the Minister of State will say whether he believes that a reduction of that order—I am not asking him to say whether he will make it; he knows that I am not so naive as to do that—would be consistent with the maintenance of the present monetary guidelines.
My belief is that it probably is at about that level of tax reduction that one runs into problems with the monetary guidelines. The crucial question then is to what extent the Government can finance the deficit and avoid an increase in the money supply by selling debt to the on-bank public. This, in turn, has crucial implications for interest rates. We are in an extremely difficult position if we are to have restraints placed on the money supply which restrict reductions in taxation in such a way that there can be no real increase in aggregate demand and no real growth in the economy. This is the crucial matter that we must face.
It is sometimes said that money supply should be neutral from now on. There were certain Press comments over the weeked suggesting that the increase in money supply should be sufficient to be neutral and finance the increase in wages plus growth at, say, 3 per cent. The problem then always is: how is it possible to ensure that it goes to real growth in output rather than bigger than expected increases in money wages? That is always a dilemma. I hope that we shall have from the Minister of State tonight an indication of the prospects that he sees for real growth in the economy and whether he believes that it can be achieved consistent with his monetary targets.
The Financial Secretary made a remarkable statement towards the end of his speech. He said that democracy could succeed only in a country with


positive economic growth. I believe that that is an exact quotation from what he said.

Mr. Robert Sheldon: It was a quotation from somebody else. I said "It has been said that".

Mr. Higgins: That puts a slightly different complexion upon it, but the right hon. Gentleman seemed to be endorsing it.
We must look at the figures on the front page of today's Financial Times, which clearly show that the gross domestic product is now at a lower level than at the end of 1973. With the 1970 index figure at 100, the figure for GDP in the fourth quarter of 1977 was 110·2, whereas at the end of 1973 it was 110·4. That is very worrying. I hope that the Minister can give us an indication of the extent to which he supports the view quoted by the Financial Secretary.
It is true that we have some assistance from North Sea oil. I hope—the motion reflects this hope—that we shall concentrate on reductions in taxation rather than increases in public expenditure. At the same time, we must take account of the effect of North Sea oil. If we are not careful, it may seriously raise the exchange rate and cause the so-called Dutch disease, with the result that industrial investment falls.
In that respect the priorities that we have suggested are right. But I hope also that we shall see a relaxation of exchange controls and considerable repayment of overseas debt, so that we can have an exchange rate which encourages industrial investment and, by then encouraging exports, leads to a higher rate of economic growth than I fear the Government, with their present inhibitions and history of management of the economy over the past four years, are likely to achieve.

Several Hon. Members: rose—

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): The last four speakers have taken almost exactly two hours. A number of hon. Members have been waiting for most of the day to speak, and there are in addition several who have gone out for a moment or two, with permission, in order to sustain themselves.

I call the hon. Member for Norfolk, South-West (Mr. Hawkins).

8.8 p.m.

Mr. Paul Hawkins: Thank you for calling me to speak, Mr. Deputy Speaker. I shall be brief, as I generally am.
I want briefly refer to the speech of the hon. Member for Coventry, South-West (Mrs. Wise)—

Mr. Thomas Swain: On a point of order, Mr. Deputy Speaker. Is it not the custom of the Chair to call speakers from each side of the Chamber alternately? As I saw it, my hon. Friend the Member for Newham, North-West (Mr. Lewis) rose, yet two Opposition Members have been called consecutively.

Mr. Deputy Speaker: As far as I am aware, the hon. Member for Derbyshire, North-East (Mr. Swain) has only just come into the Chamber.

Mr. Swain: I have my eyes open, just the same.

Mr. Deputy Speaker: Had he been here, the hon. Gentleman would have noticed that there were three speeches which did not come from the official Opposition Benches and which took up an hour and 40 minutes.

Mr. Arthur Lewis: Further to the point of order, Mr. Deputy Speaker. It may well be true that while you have been in the Chair you have not observed my presence. I must be slimming more than I thought. I have been here for the whole of the debate, with the exception of the last hour, when I had to go out, and you have already said that hon. Members have to go out from time to time. I rose in my place, but it appears that I must now stop slimming, otherwise I shall not get called.

Mr. Deputy Speaker: Mr. Hawkins.

Mr. Hawkins: I was about to refer to the speech of the hon. Member for Coventry, South-West. Unfortunately, her speech seemed to be so full of class hatred that she seemed to have forgotten what makes human beings tick. It was evident when she said that no one who had been taught medicine in this country should ever dream of going abroad. The


country has been losing not only a large number of doctors but a large number of other skilled people.
With regard to the hon. Lady's remarks about the Health Service, I must point out that in Norfolk the lists are so long that people cannot get an appointment for a consultation in under a year. I believe that the Health Service is near breaking point, not because immense sums of money have not been spent on it and not because immense numbers of people are not employed in it, but because we have allowed so many skilled people to leave the country as the result of personal taxation being so high.
I found the ideas of the hon. Member for Cornwall. North (Mr. Pardoe) very constructive. As I am not an expert on taxation, I am not able to know whether they are entirely practical, but I sat with him for a year on the Select Committee considering a wealth tax, where he put forward all sorts of very attractive ideas. I think that I agreed with most of them.
I believe that high personal taxation in this country is the killer of initiative and enterprise, the qualities with which we must be re-equipped if we are to succeed. I therefore support my right hon. and hon. Friends in their motion.
Historically, the Labour Party has always been the party of high taxation. It still believes that it can spend the ordinary man's earnings far better than the man himself is able to do. This illustrates the great difference between the Conservative Party and the Labour Party. Conservatives believe in trying to leave as much money as possible in the wage earner's pocket, so that he can spend it as he likes. We believe that the wage earner is the right judge of what to spend his money on, and as a general rule he shows sound common sense in that respect.
I understand that the first amendment is not to be called. I should not have mentioned it except for its reference to the measures it puts forward as being
preferable to a reduction in the standard rate, which has not been requested by the TUC, Parliamentary Labour Party, or the Labour Party.
I find it extremely arrogant of those who put down the amendment that they should

believe that the country should not have a reduction in the standard rate of taxation unless it has been requested by the three bodies just mentioned.
We are always being told of resolutions which have been passed by the Labour Party conference. They have become a sort of Bible which Labour Members are supposed to follow. I believe that we must not stick to the outmoded ideas of the extreme Left of the Labour Party but must try to get away from them and cut our personal taxation to something close to that of our Continental neighbours.
I want to refer to two points on taxation which affect my constituents. Mine is a big rural constituency, with no large centres of employment. Men and women have to travel 10, 12 or 15 miles to work and back again. Because they live in small villages there is no public transport for them. In order to get to Norwich, King's Lynn or Thetford—all outside my constituency—it costs them £7, £8 or £9 a week to run a car. They cannot charge this against tax.
In addition, they are taxed on the extra money that they earn through setting off from home three-quarters of an hour early and returning three-quarters of an hour late. They work hard and when they get home, after paying for their petrol and running their car, they find that their neighbour, who has stayed at home, and is unfortunately unemployed, has received within £1 or £2 of what they have been able to earn by going to work. This has the effect of putting them off work. Many younger people do not go out to work, because of the high taxation and the enormous cost of travel.
I put it to the Treasury Ministers that consideration should be given to the difficulties of the ordinary working men in country districts who have to travel these enormous distances.

Mr. Arthur Lewis: Why should Ministers, with their tax-free cars, know about it?

Mr. Hawkins: I ask the Treasury to consider whether an arrangement can be made whereby these men and women who have to travel long distances to work are able to set off against tax the cost of their travel.
My next point concerns capital taxation on farmers. Capital taxation is destroying the farmer. We have been promised a wealth tax, with a threshold of £100,000. A 150-acre farm—which is not a very economic proposition except on the very best land—would today be valued at £150,000. Every year an acre or so would have to be sold in order to pay the wealth tax and other taxes. This, after both Conservative and Labour Governments have been giving money to farmers to amalgamate smallholdings, seems to me to be one of the most ridiculous suggestions that I have come across.
I want next to refer to the complete unfairness of the taxation position as between the ordinary private farmer and large institutions, such as insurance companies, trade unions, and so on, which buy land and are not affected by capital taxation. I sincerely hope that the Government will look at this matter very carefully. In my area large institutions are buying a large slice of the bigger farms. This is cutting down the land available for the ordinary farmer who wants to farm on 400 acres or 500 acres. There are villages in my area which are totally occupied by institutions which farm land, although the principals live in London and have no connection at all with the villages. This is very bad from a social point of view, and the practice is very unfair on the private farmer.
I believe that the Liberal Party should be able to support the motion in the name of my right hon. and hon. Friends, which in my opinion would do far more than anything else to increase employment.

8.20 p.m.

Mr. Arthur Lewis: I am sorry to have to confess this, Mr. Deputy Speaker, but, believe it or not, today happens to be my birthday. It is my twenty-first birthday—

Mr. John Cope: Hear, hear.

Mr. Lewis: The hon. Gentleman does not know that I have been briefed by the Treasury and that the briefing cannot be correct, because I have been here for 33 years.

Mr. Cope: Not all the time.

Mr. Lewis: Yes, all the time. Hence, when I say that I have been here 33 years and that I am only 21, something must be wrong. The "wrong" is the fact that I have been briefed by the Treasury.
During my time in this House, I have listened to all Governments and all kinds of Ministers, fat, thin, large and small. Every two or three months they come along and swear by God that they have got it right—that they have got inflation down, got inflation up, or whatever. But the following week they come along and tell us that they have got it wrong.
I have been amazed as I have sat here for these last 33 years. I do not normally take part in Budget debates or debates on Treasury or financial matters. But I have listened to the experts and the pundits from both sides of the House. The only difference between them is that those on the Government side are better than those on the Opposition side at reading their briefs. They are not party politicizing, because the same people draw up the same briefs irrespective of which party sits on the Government Benches. But because Government Members have written briefs in front of them, they are better at reading them than Opposition Members.
I remember the start of the so-called wages freeze. It was thought up by a man called Mr. Armstrong, who was head of the Civil Service. He thought that it would be a good thing to have a wages freeze and that it would solve all our problems. But before he persuaded what was then our Government—the so-called Labour Government—to introduce a wages freeze, he took great care to ensure first that top civil servants had a 25 per cent. increase in their salaries. He first cushioned them from the effect of the freeze.
He then saw to it that they had an indexed pension scheme in order to cushion them from whatever inflation might come. Then, as he was about to retire himself, he saw to it that he prepared the day. When he retired, he did not draw his pension immediately but put it off for 12 months. Why? It was because he wanted to get the indexed pension.
Then, of course, he went off with a very fat pension. Ordinary civil servants got fat pensions because, it was said, they could not expect to get jobs outside.


By jingo, what happened? Like his predecessor who was Chancellor, Mr. Armstrong went off to be chairman of a bank at a salary of £20,000 a year on top of his indexed pension.
He then went off and attended a Salvation Army meeting and said "Thank God for God, and thank God for this great right of approaching our taxation matters on a fair basis." He is now Lord Armstrong. He has joined Lord Barber, who once sat on these Benches.

Mr. Dennis Skinner: That is true.

Mr. Lewis: Of course it is true. They are all bloody hypocrites.

Mr. Deputy Speaker: Order. The hon. Gentleman must moderate his language with regard to another place.

Mr. Lewis: Very well, Mr. Deputy Speaker. I am sorry that my enthusiasm ran away with me. All except members of another place are bloody hypocrites.
I am glad to follow the hon. Member for Norfolk, South-West (Mr. Hawkins). I agree with what he said. Is it not hypocrisy not to allow workers to have tax allowances for their travel to work but so to fiddle the system by co-operation between the two Front Benches—the Liberals are never here, I do not know where the Scottish nationalists are, and the Welsh nationalists remain in Wales—that we allow Ministers to have free travel to and from their places of residence and their offices?
The two Front Benches fix it because one day the Opposition will benefit from it. It is a racket. Like other hon. Members, I have been here late at night and have seen cars going out of New Palace Yard. One person per car goes off while the stupid blighters—I was going to say something stronger than that—the ordinary Members of Parliament, have to get taxis, trains or buses and pay either tax on the fares or the actual amounts. What a farce. What hypocrisy. That is happening almost every night of the week.
Then, of course, two right hon. Members on the Back Benches, who have probably earned more out of their parliamentary activities than any other hon.

Members sitting here, are provided with cars—with drivers, petrol, oil, insurance, clearance and so on—worth at least £5,000 a year. They are the right hon. Members for Huyton (Sir H. Wilson) and Sidcup (Mr. Heath).

Mr. Skinner: What about the Leader of the Opposition?

Mr. Lewis: No, she gets it for being Leader of the Opposition. Yet those two right hon. Members are so busy that they are rarely here, not because they are on parliamentary business but because they are signing books. Each of them has earned vast incomes. But ordinary working-class men and women are paying for their privilege out of taxation.
Let us consider the problem of housing. Every Labour Member—I do not know about the Conservative Opposition—has housing problems in his constituency. We used to have a Chancellor of the Exchequer who owned three houses. I think he now owns only two. One he lived in, one he let and one he was using at the taxpayers' expense. He has now sold the one he was letting and has the one that he is living in and the one which the taxpayers pay for.
Not only does he get the house, but he gets coal, fuel, lighting, cleaning and everything else, worth between £10,000 and £15,000 a year. He says "I must have that because of the exigencies of my job". Next door to him happens to be the Prime Minister. The Prime Minister has not got a house. He finds that he can manage without one. But then the same Chancellor of the Exchequer comes forward and tells my firemen, my dustmen, my bricklayers and my carpenters that they cannot have an additional £2 or £3 a week because that would be above the 10 per cent. What bloody hypocrisy! I say "hypocrisy" because that is what it is.
The Government tell us that they cannot find money for the National Health Service, the social services and the rest. Of course, they can. They spend money like water when it suits them. They are not a bit interested in making savings where they can be made without damage either to the social fabric or the country or to the well-being of ordinary people. They are not a bit interested because most of them, on both sides of the House, came into politics because it was a step


in their careers and because coming into this House would forward those careers. They were interested only in making progress in their careers.

Mr. Leslie Spriggs: Is my hon. Friend aware that when the last Finance Bill was before the House I had been invited to move an amendment putting Back Benchers on a par with Ministers of the Crown in terms of their expenses in travelling to and from Westminster? Although that amendment was quite in order, Mr. Speaker did not call it. However, he called the motion in the name of the Chancellor of the Exchequer to excuse himself from paying tax on the property which he lived in at the expense of the taxpayer.

Mr. Lewis: My hon. Friend is quite right. But we must never criticise or question the occupant of the Chair, and I shall not do so. We all know the usual custom whereby all Government motions and amendments are always in order, whereas Back Bench Members' motions and amendments are not always so. I do not criticise that, although I accept my hon. Friend's contention.
We find duplicity and double dealing which is supported by both Front Benches. When it comes to it, there is no difference between them.
Here I come to the attitude of the electorate. The people are fed up to the eye teeth with both political parties. I ignore the Liberals. They are non-existent. They will be washed out in the next General Election. No one supports them. They are so politically dishonest that no one has confidence in them. I know nothing about the Scottish nationalists, other than that they are never here. My only connection with the Welsh nationalists is that I have a Welsh name and my forebears were born in Wales. But the Welsh nationalists are never here either. However, people say—and they are right—that there is nothing to choose between the two major political parties.
Let us consider the latest furore about immigration. I shall not go into the rights or wrongs of it. However, with the population that I have in my constituency, of whom 25 per cent. are immigrants. I know that there are problems. There are grave housing, education and health problems, and I could go on. Most of those problems could be resolved overnight if

the Government allocated enough money to build schools, houses and hospitals. If they poured in the money, that could be done. But they do not do it, and then they come bawling to us that we must not have unrest about immigration. They say "Do not let us have unrest". But I say to them "Then do something about it instead of having your cars and houses and feathering your own nests. Let us look after the people who are really in urgent need. Let us look after the people who are living three and four families to a house. Let us look after the people who cannot get into hospital without waiting for months on end".
They do not do it, of course, because the Treasury has not got it in its brief. It was the late Franklin Delano Roosevelt who said something to the effect that in politics, if it happened, it did not just happen; it was planned that way.
In this country, with this Government, we have planned to have unemployment. I have been in public life and in the Labour movement for 40-odd years, 33 of which have been spent in this House. I never thought that I would live to see the day when a Labour Government planned for unemployment. The reason is that the IMF so directed them. The IMF told the Government that, if they wanted money, they had to cure inflation by having unemployment. Therefore, we had deliberate unemployment created by this Government.
Is it not the case that we have unemployed bricklayers, carpenters and builders? Do we not need schools and hospitals? They are needed in my constituency. What is stopping us having them? There is only one thing—money. And who says "No"? It is the Treasury. It is those same advisers who cushion themselves with pensions and £20,000-a-year jobs. There are people who come here seeing it as a new job in their career. They come in and sit on the Front Bench and court the eye of the Prime Minister. They get a job as a Minister and then are told "Please get up and read out this brief from the Treasury".
Someone said something about the Chancellor of the Duchy of Lancaster. Who is he? Is he the man who was always absent for four years on end when in Opposition? Is he the man who is looking after small business interests? We know that he is fully capable of looking


after small business men. Now we are told that the cost of living is going down. We are told that the Government have brought inflation down to 9·9 per cent. But have they? I do not know. I suggest that they should ask any housewife.
On Friday last, we heard from the right hon. Gentleman the Secretary of State for Prices and Consumer Protection. On the very day that he was at Ilford proclaiming how well we had done, the brewers announced an increase of 2p on the price of beer. What did the Government do? Not a thing. Of course, the Minister does not have to believe me on this. He can ask any housewife, because in that very week the Grocers' Gazette announced increases in the price of 270 items ranging from baby food to beer. After that, the Government come along and try to kid us. They can kid some of the people some of the time, but they cannot kid all the people all the time.
We have here three amendments. One is the official one. I believe in the first part but not in the last part of it. I am all in favour of private enterprise and want to see more of it, particularly in areas such as mine which have always been neglected. Unfortunately, the other amendments will not be called, so I shall not support them. Normally I would have voted against or abstained, but if I do so it means that I am defeating my own object of seeking increased public expenditure, something I want to see. But I do not want anyone to think I am satisfied with the approach of this Government to a number of problems.
In one particular school in my area, 80 per cent. of the schoolchildren—eight out of ten—are immigrants, but we cannot get schoolteachers. Let us not laugh at this, because it is a serious and tragic matter. We cannot get teachers because they do not want to go to this school because it is not possible for them to communicate. Teachers, irrespective of party, politics, race or religion, are very interested in their job,. They love it. They have gone into teaching because they want to communicate. But they cannot communicate in this school because five different languages are spoken there—Urdu, Hindi and so on. Therefore, a teacher cannot communicate. That is why I ask for more money so that we can get teachers to teach these languages.
In my constituency there are appalling schools that were condemned 100 years ago. I cannot blame the present Government or the Opposition for that, but I can blame the Governments of the past 100 years, of both major parties. These schools have been condemned for 100 years, yet there are still children and teachers in them and the Treasury is still stopping us from getting the necessary money.
I am not in any way enamoured of either Front Bench. I feel like the chap in the market square who is trying to tell his story. One goes to one stall and the stallholder says that he has the finest existing product to sell and that it has come from the finest manufacturer. The next stallholder says exactly the same thing, except that he probably says a little more, and one buys the article. When one returns later, one finds that one could have bought the same object cheaper from the first stallholder.
Let us not believe the Government. I am sure that the public do not believe them. That is why there is such a cynical approach to politics.
We are now seeing the emergence of fringe parties. I hate and despise the National Front, but let us not worry too much about the National Front because other fringe parties can and, I think, will come forward unless we get down to the job of being honest. We are not honest today because Governments of both major parties fall back on the Official Secrets Act. When they want to cover up something, they do it by using that Act, saying that it is not in the public interest to know, be it the scandal of the Crown Agents or scandals of this or that place or whatever else. They do not want the public to know.
Many wrongs would be put right and many misdirections would be corrected if we had a freedom of information Act whereby any Member of Parliament and any taxpayer who paid the wages of Ministers and civil servants would have the right to know and the right to examine all the facts and figures upon which advisers give advice to the Treasury Bench. If we had the chance to know, I am sure that advisers and Ministers would not make the dangerous mistakes that they are making now and have been making during the past few years.

8.43 p.m.

Mr. A. P. Costain: When the hon. Member for Newham, North-West (Mr. Lewis) rose to speak, he declared that today was his birthday. His speech was very long, but it is still the same day. I wish him many happy returns. I equally wish him many happy returns from the speech that he has made, and I congratulate him on the fact that every time he rises to make a speech he seems to make the same one, although in a different tone. It is amazing how he manages to keep everything in order. However, he has been in this place for 33 years and he is an experienced Member.
We know how the hon. Member always attacks the Treasury. We may wonder why he has not been a Minister in the 33 years that he has been a Member of the House, until we listen to his speeches, when we know why that is so.

Mr. Arthur Lewis: I am not a crawler.

Mr. Costain: I have not been a Minister, either, so let us get the matter right.
The debate is actually about the motion on the Order Paper. We have heard a variety of speeches from both sides of the House. I should like to refer in detail to the speech of the hon. Member for Cornwall, North (Mr. Pardoe), speaking for the Liberal Party, but before doing so I want to make special reference to the hon. Member for Birmingham, Perry Barr (Mr. Rooker). I am sorry that he is not here. He made a very important contribution by drawing attention to the fact that there are many people who have not paid their taxes.
The hon. Member referred to the report of the Comptroller and Auditor General. Had he done his homework properly he would have known that the Public Accounts Committee, of which I am a member, cross-examined Sir William Pile, the head of the Inland Revenue. We were very worried about the number of people who got away without paying tax. At our sitting on 18th May last year, I asked Sir William:
I think that I have questioned you on this before and have never quite understood it—why you cannot collect tax from people who have gone abroad. Presumably, if you caught up in ten years' time with these people shown as having gone abroad, they would have to pay, plus the interest that was owing, would they?

Sir William answered:
Yes. The fact that we remit a tax, let it be said straight away, is not discharging a tax. They still owe us the money. We have just given up because we have exhausted for the time being all the ways that we can employ to get it, but it is still there, and if they come back they will pay it, if we can get hold of them.
The situation is simply that we allow people to go in and out of the country without checking whether their tax is paid. In the United States of America—anybody who has worked there will know that this is true—before one can get an exit visa one must prove that one's taxes have been paid up to date.
The hon. Member for Coventy, South-West (Mrs. Wise) made a remarkable speech. It summarised extremely well the basic difference between the Socialist and Conservative Parties. The hon. Lady based all her arguments on the belief that anybody who goes abroad in order to pay less tax is disloyal. She claims that as such people were trained in this country they should not take their talents overseas, because it is not partiotic.
It is remarkable that a person who goes abroad to work for a so-called multinational company—which Labour Members dislike so much—and makes profits abroad to bring back to this country should be criticised. But, in the view of the hon. Member for Coventry, South-West this action is wrong.
If someone strikes because he cannot get proper differentials and holds up supplies bound for overseas, hon. Members on the Government Benches regard it as an expression of the solidarity of the trade unions. But I believe that these people are guilty of export sabotage. They are stopping exports and therefore holding up the expansion of the company and causing unemployment.
When it is all boiled down, the greatest difference between the two parties is that Conservatives believe that one can shear a sheep once a year. Socialists believe that if one takes the skin off a sheep it still will not die. It is the middle management of this country which creates employment. The middle management takes the brunt of the work, works long hours and has to sustain a decent standard of life. It is middle management that is always affected by taxation.
I was talking to a man recently who went out from this country to do a job abroad. He was successful and earned a good salary in Australia. He reorganised a company there and made it a success. The question arose whether he should return to this country, and he sat down to calculate the difference it would make in taxation if he were to return to this country. He was receiving a salary of about £20,000 a year. The hon. Member for Newham, North-West mentioned a director of a bank who was receiving a salary in that region. I think the hon. Gentleman got the figure wrong, because that director was probably receiving £40,000.

Mr. Arthur Lewis: I was not objecting to that; I was objecting to the man fiddling the books before he went, namely, by taking a Civil Service pension out of the taxpayers' pocket.

Mr. Costain: I refuse to discuss these matters with the hon. Member because the person concerned is not here to defend himself. It is unfair for the hon. Member, within the privilege of this House, to make such allegations against a civil servant for whom we have high regard. I repeat that that man cannot be here to defend himself.
Let me return to the story of the successful business man who was in Australia and considering whether he should return to the United Kingdom. He calculated that it would cost him over £11,000 a year in take-home pay if he were to return to this country and undertake exactly the same job at exactly the same salary. Does that make sense? We are forcing young people to go abroad because they cannot earn a decent take-home sum.
I am sorry that the hon. Member for Coventry, South-West is not present, because I wanted to refer to her. She is always objecting to anybody having a reasonable income, but does she not realise that it is that kind of person who buys motor cars and whose wife buys dresses—the kind of person who creates employment? Is that a terrible crime? Even if people save, the money eventually goes in death duties. We must create a feeling that it pays to take risks.

Mr. Arthur Lewis: What about the firemen and the miners? Do they take home £11,000 a year?

Mr. Costain: The hon. Gentleman has already spoken for 20 minutes. He should contain himself in patience. The firemen carry out an extremely good job and save many lives, but I am speaking of people who create employment and opportunities.
The Labour Party is always complaining that there is insufficient investment, but how can we expect people to risk everything they have if at the end of the exercise they are allowed to retain only 3p in the pound. I have taken risks in my business life; indeed, I have risked everything I had, and, thank goodness, I have been successful. But I certainly would not have worked as hard and taken as many risks if I had known that I would retain only 3p in the pound. That is what this is all about, and it is why we have such high unemployment. Let us give people the opportunity to make profits.

Mr. Arthur Lewis: All the people.

Mr. Costain: Yes, all the people. We are now regarded as a low-paid nation. Japanese firms are coming here to set up factories because they know that our rates of pay are among the lowest in the world. That is the fault of the Government, because they do not encourage enterprise. Because that is their policy, it does not attract investment and it prevents the creation of new employment.

Mr. Eric S. Heffer: Since there is no Labour Government in the United States and since there are incentive policies in that country in a totally free capitalist system, why does the hon. Gentleman think that there is such a high level of unemployment there?

Mr. Costain: I should be going outside the terms of the motion if I discussed unemployment in the United States. We do not have the time for such a discussion anyway.
There are people in America who are better off than people in this country. I have worked in America and I appreciate that there are some things about the American economy that we do not like, but at least opportunities exist there and people can get on and keep what they make.

Several Hon. Members: rose—

Mr. Deputy Speaker (Sir Myer Galpern): Order. Before calling the hon. Member for Bolsover (Mr. Skinner), I indicate to the House that the winding-up speeches are due to begin at 9 o'clock.

8.55 p.m.

Mr. Dennis Skinner: I shall be as brief as I can, Mr. Deputy Speaker. After seeing the Opposition's motion, I decided to do a little exercise to find out precisely what the Tories want. They say that they want to reduce direct taxation, and no doubt they will be repeating that claim in Ilford time and again between now and polling day.
We should examine their intentions in terms of taxation and especially in relation to direct taxation. A cursory glance at the Questions to the Chancellor of the Exchequer for Thursday of this week gives an indication of what they want to do and how they will manage to reconcile cutting back direct taxation while, apparently, also allowing massive reductions in indirect taxation.
In his Question, the hon. Member for East Grinstead (Mr. Johnson Smith) wants to reduce the amount gathered through the development land tax. That would have an effect on the amount raised in taxation. The hon. Member for Christchurch and Lymington (Mr. Adley) is anxious for more money to go into industrial building allowances to assist hotels. He wants it raised to the level in the Common Market. Where will that money come from?

Mr. Rooker: The hon. Member for Christchurch and Lymington (Mr. Adley) has an interest in hotels.

Mr. Skinner: I know about the hon. Gentleman's interest. Does the Leader of the Opposition agree that there should be an increase in building allowances to assist hotels? The Opposition Front Bench must indicate whether it agrees with such proposals.
If the hon. Member for Derbyshire, South-East (Mr. Rost) supports the Opposition motion, he must want a reduction in direct taxation, but his Question on Thursday asked for a three-year average tax liability to be allowed for agricultural businesses. One can only imagine that he wants a reduction there.
Not content with all these proposals, the hon. Member for Kidderminster (Mr. Bulmer) wants to ensure the protection of the national heritage in respect of buildings and works of art. I assume that this would involve tax measures. If so, they must be balanced against the money due to be raised through direct taxation.

Mr. Arthur Lewis: What about the stately homes in Bolsover?

Mr. Skinner: We have Bolsover Castle and Chatsworth House, but I am not the one arguing against high levels of taxation. I believe, as I said when the public expenditure cuts took place, that the only way to reduce that human pile of misery known as the dole queue is to ensure high levels of public expenditure in order to keep people at work to carry out the social services that are so necessary and to build and maintain schools and hospitals.
According to Thursday's Order Paper, the hon. Member for Romford (Mr. Neubert) wants exemption from dividend control. Does his Front Bench agree with that? Exemption from dividend control would reduce the amounts available to the Government. How are these sums to be calculated? Not much is collected from dividends anyway, and the hon. Gentleman is attempting to reduce that amount still further.

Mr. F. A. Burden: The hon. Gentleman has it the wrong way round.

Mr. Skinner: No, I have not.

Mr. Burden: Try again.

Mr. Skinner: I recall an occasion in July, shortly before the Summer Recess, when Conservative Members supported a measure that would have had the effect of reducing the amount taken by the Government. We know what the Tories are up to, and it is significant that the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) is proposing some relaxation of Schedule D. That is another sum that will go missing.
The hon. Member for Twickenham (Mr. Jessel) wants to know the amount of the annual revenue raised from vehicle excise duty. One can only assume that he is on that bandwagon, too. The hon. Gentleman probably wants to reduce that duty.
The hon. Member for Eastbourne (Mr. Gow), not to be outdistanced by his colleagues, is arguing about North Sea oil. He wants to know the revenue derived from North Sea oil. We know what the Tories did when the Petroleum and Submarines Pipe-lines Bill came before the House. They voted against it. They were against the idea of the North Sea oil companies, which are multinationals, having to pay tax that might equate to about 75 per cent. It is pretty clear that the hon. Member for Eastbourne is attempting to raise that issue again. I want to know what the Leader of the Opposition thinks about that. Will that be included in the Ilford speeches?
The hon. Member for Brentwood and Ongar (Mr. McCrindle), not content with the demand for tax reductions, wants tax relief to apply to mortgages of up to £40,000 instead of £25,000. It may be that my right hon. Friend the Minister of State, Treasury will give us his calculations when he replies.
The hon. and learned Member for Kinross and West Perthshire (Mr Fairbaim) wants the interest on the first £5,000 exempted from tax. How much would that cost? I know that my right hon. Friend will have the answer and will give it to the hon. and learned Member on Thursday.
Every day that we come to the House, whether at social services Questions, defence Questions or at any other time, we hear that Opposition Members want to increase the amount of money that is spent. They continue to ask for subsidies and tax relief. They are specific about what they want. It is time that it was spelt out precisely from the Opposition Front Bench what the Tories would do and how they would cut taxation by the massive amount that they suggest. The Order Paper tells us the real story.
I have ben consistent on these matters. I want public expenditure to be increased. I want services for the working class to be improved. I want to see bus fares for children abolished. I want to see a uniform proposal for the elderly which would mean extra taxation. I am prepared to pay my share. I want to see free school meals. I do not want the means testing that we have at present. All those measures will mean taxation. I

am prepared to put my cards on the table.
The Opposition are trying to kid the public that they are against taxation when at the same time they want all the measures to which I have referred. The Opposition Front Bench has a duty to spell out precisely what it would do, where it would go and from where the money would come.

9.3 p.m.

Mr. Peter Tapsell: I am afraid that the hon. Member for Bolsover (Mr. Skinner) will have to contain himself in patience until Question Time on Thursday, when all those Questions may be answered. The hon. Gentleman will then have to wait a few more months until one of my right hon. Friends has the opportunity to open the first Budget of the next Conservative Government. I am here tonight not to do that but to support the motion that was so ably moved by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees).
It used to be said that we could best judge a civilisation by studying its penal code. Today, in the industrialised free world, an even more revealing test has become a nation's tax code. Dynamic, successful and internationally respected countries with rising living standards for their people nearly all have relatively low rates of direct taxation. By contrast, the countries that appear to be in decline, where the industrial arteries seem to be hardening, where the youth and talent are prone to emigrate, where profits, investment, job creation, welfare benefits and living standards are relatively low, almost invariably have high rates of direct taxation.
If that is not cause and effect, it is an historical phenomenon that invites scientific study. Indeed, many hon. Members on both sides of the House—for example, the hon. Members for Birmingham, Perry Bar (Mr. Rooker) and Putney (Mr. Jenkins)—expressed grave concern about the state of our tax system.
In Britain today people start to pay income tax at a lower level of wages than anywhere else in Western Europe. What is more, when they come into the income tax net they are faced immediately with a marginal rate which is the highest in Europe. All levels of society suffer


from this burden of excessive direct taxation, as hon. Members on both sides of the House have repeatedly pointed out during the debate. Even those with earnings below the official poverty line, come very close to falling within the income tax net. I was interested by many of the comments made on that subject by the hon. Member for Perry Bar.
As many commentators have pointed out, when lost social welfare benefits are also taken into account, a typical family man, with a wife not at work and two children, moving out of unemployment into a job at a wage as high as £55 a week—I take a higher example than that postulated by my hon. and learned Friend the Member for Dover and Deal—pays an implicit marginal tax rate of no less than 64 per cent. on the early increases in earnings that he achieves above that level. If his wages are lower than £55 a week, that implicit marginal tax rate is even higher and can, as the hon. Member for Perry Bar rightly said, go over 100 per cent.
It is not only at the top end of the income scale that our tax system bears harshly and also acts in a seriously disincentive way. The income tax burden on men and women in middle management in this country is considerably greater than that on their counterparts n, for instance, Germany, France or the United States. For the most talented and successful, our tax rate rises more steeply and to much higher levels than almost anywhere else. Our higher rates of income tax are far above those in the rest of the EEC. Even world-wide they are exceeded only in a handful of developing countries of the less successful kind, where, to put it delicately, the distinction between tax avoidance and tax evasion sometimes gets blurred. For purposes of comparison, they can be disregarded.
In West Germany, the top rate of income tax is 56 per cent. Here it is 83 per cent.

Mr. Hugh Jenkins: Disgraceful.

Mr. Tapsell: A parliamentary Answer on 14th February revealed that in France the proportion absorbed by income tax and employees' contributions to social security for a maried man with average earnings and two children is 9·2 per cent.; in the United States, 8·2 per cent.; in Japan, 8·4 per cent.; and in Britain,

25·5 per cent. That is the extent to which the working man on average earnings has his pay packet and incentive reduced by our tax system.
When we consider the treatment of savings income, international comparisons are still more unfavourable to Britain, where the top rate reaches the staggering figure of 98 per cent. When I quote that figure to industrialists overseas, they simply will not believe it. They ask "Where do your new investment funds come from for the private industrial sector of your economy?" They may well ask.
With tax rates such as these, it is no wonder that we have 1½ million people unemployed. There are 900,000 more people out of work now than when this Labour Government took office four years ago. I wonder how many Labour Members below the Gangway promised that to their constituents at the last General Election. It is no wonder, too, that production levels are lower today than in 1973.

Mr. Burden: Does my hon. Friend recall than in a debate on employment sometime ago the Minister, in answer to an intervention of mine, said that if unemployment in this country reached 1 million, there would be rioting on the Government Benches?

Mr. Tapsell: Indeed I do. One of the most shocking things about the behaviour of the Labour Party in recent years, with a few honourable exceptions, has been the extraordinary lack of interest and concern that it appears to have shown at the steadily rising rate of unemployment which is the scourge of our society and about which the next Conservative Government are absolutely determined to do something.
No wonder that production levels are lower today than they were in 1973. No wonder that new investment in industry, as we saw in the Financial Times today, is grinding to a halt, or that today's headline in the Financial Times reads:
Treasury forecasts only small rise in economic activity.
After four years of absolute stagnation and declining activity, is it surprising that the consequent non-competitiveness of British industry has drastically reduced the competitive value of sterling overseas


and actually halved its purchasing power at home? Is it surprising that almost everyone's real wages have been cut by an average of 9 per cent., or that this Government have had to borrow $20 billion from our competitors all round the world, just to keep going?
Nye Bevan once said that the religion of Socialism is priorities. He was wrong. The religion of Socialism is taxation. From each, irrespective of his capacity; to each according to the dictates of the State. That is the Labour Party's fiscal philosophy. This has not happened by chance, bad luck, or even because of mismanagement, ample though that has been. It was planned and announced. It arises naturally and inevitably from the economic philosophy of Socialism, which is committed, as a fundamental precept, to transfer wealth from the individual to public hands, as many of today's speeches made clear. That is what Socialism is all about.

Mr. Skinner: Since, in Opposition, the Tory Party has changed from what it was when in office and since the hon. Member was a supporter of the Conservative Government between 1970 and 1974, can he confirm that there was a massive increase in public expenditure during that period? Does he say that that equates with Socialism during that period?

Mr. Tapsell: There was a substantial increase in public expenditure in those years. The main reason was that unemployment began to rise towards the 1 million mark. The Conservative Party took that so seriously—unlike the present Government—that it thought it necessary to take action. When the Conservative Party went out of office unemployment had fallen to 600,000. Why does not the hon. Member for Bolsover press his Ministers to do something about its present level?
The Chancellor of the Exchequer promised the comrades, in advance, that there would be "howls of anguish" when he put up taxes. For once, events have proved him right. Speaking to the Labour Party Conference in Blackpool in October 1973, the right hon. Gentleman said:
Our programme is going to cost money, and money can only be raised through taxation. If we are to command the support we need from the British people to carry our programme out,

we must make certain that the burden of taxation is distributed fairly.
Well, the burden of taxation has certainly been distributed, but whether the Chancellor could find anyone anywhere who thought that it had been distributed fairly I beg leave to doubt. Certainly, not many took that view in Walsall, or Workington or Stechford or Ashfield, nor will there be many in Ilford, North.
While the Chancellor of the Exchequer has boasted over the years about his high taxes the Leader of the House, in similar vein, has been boasting about rising public expenditure. Only shortly before Nemesis and the foreign central bankers overtook them the Leader of the House, speaking to the NALGO conference at Eastbourne as recently as 8th June 1976, said:
It is no good saying to me in this Labour Government that we are opposed to public expenditure because in fact this Labour Government during the past 2½ years … increased public expenditure proportionately more than any previous Government we have had in our history.
He can say that again—and add that they have also increased taxes to pay for it more than any previous Government. They have taken from the British taxpayer in four years £14,000 million in extra taxation over and above the tax rates they inherited from the last Tory Government. Now, with an election on the horizon, the Cabinet has been locked in agonised discussion over the past weekend to see whether it can reduce that extra burden by even one-seventh of an election sweetener.
The fact is that just to restore income tax rates and personal tax thresholds to their Tory equivalent of 1973 would cost approximately £5,000 million in revenue. Apparently even the Secretary of State for Energy has not suggested that this is possible for a Socialist Government, even in an election year. Speaking of energy, we have heard a good deal recently about not frittering away the benefits of North Sea oil revenues. I have news for hon. Members opposite. They have already done it. The money has been well and truly frittered away by them in advance. Even on the most optimistic assumptions the total revenues from North Sea oil in the period 1977 to 1980 inclusive will be £5 billion. That is what it would cost this Socialist Government to get back to Tory tax rates for just one year.

Mr. Rooker: The hon. Member for Horncastle (Mr. Tapsell) is making an important statement, which needs clarifying so that we may know exactly what the Tory policy is. If the tax rates were put back to what they were when the Tories were in power, in real terms, it would mean that the extra expenditure for which we used the taxes, which initially was to raise teaches' and nurses' salaries, would have to bear the brunt of the change. Is the hon. Member suggesting a reduction in teachers' and nurses' salaries?

Mr. Tapsell: I shall have to give the hon. Member for Perry Barr private instruction at some time, but I cannot have my speech interrupted now with what is an irrelevcance. I have certain important things to say to the House—

Mr. Hugh Jenkins: rose—

Mr. Tapsell: I cannot give way. I started my speech late, having had to wait for the hon. Member for Bolsover to finish his speech.
After 1980 the oil revenues, even on the most optimistic assumptions, might reach £3·5 billion a year. Yet between now and 1984 we have to repay $20 billion of foreign debt incurred by this spendthrift Government. So the brutal fact is that the Socialists have already largely mortgaged the North Sea by their past extravagance, and that is one of the reasons why the latest economic predictions show this country going back into balance of payments deficit by the middle of 1979.
Here we are exceptionally—one might say divinely—privileged by geology in a world nearly desperate about its future energy resources, an island of coal surrounded by a sea of oil. Yet still the Socialists cannot discover a method of government by which this nation can pay its way. The root cause of their problem throughout has been excessive public expenditure financed by excessive direct taxation and expensive foreign borrowings.
The old collectivist cliché about public squalor amid private plenty rather inelegantly dredged up by the Government amendment has been turned on its head in recent years. What we have seen and experienced in recent years has been private penny-pinching amid public extravagance, as even The Observer in its

leading article last Sunday went far to admitting. The wider effects of the consequently excessively high taxation are also plain to see both on individuals and on industry.
The sad truth is that millions of working people in Britain less fortunate than we are in this House have jobs which they find dull and uninteresting, or even positively unpleasant. They work to earn a living and to improve the material circumstances of themselves and their families. To them the cash in their pockets at the end of each week or month is the spur to extra effort. It is folly to ignore this basic fact of economic and personal life which provides the main motivation in a free society.
What is true of the individual is true of the organisation. The effect of ever-higher levels of direct taxation has provided a serious disincentive impact on the corporate bodies of industry as it has for the individuals that work for them. The figures for declining company profitability are truly grave. In 1964, at the end of the 13 prosperous years of Tory government during which the people really "had it good", with almost full employment, relatively stable prices and steadily rising living standards, the overall return on capital employed in industrial and commercial companies in Britain was 13·2 per cent. By 1970, after the first recent spell of Socialism, it was down to 8·3 per cent.

Mr. Tom Litterick: What happened in America and Germany at the same time?

Mr. Deputy Speaker: I ask the hon. Member for Birmingham, Selly Oak (Mr. Litterick) to restrain himself. As I have said on previous occasions, I will not permit sedentary interventions.

Mr. Tapsell: By 1976—these are the latest figures I have seen—after the second spell of Socialism, profitability was down to 3·3 per cent. Those are pre-tax figures. Net of tax, the average return on capital employed by industry and commerce has recently been running at about 2½ per cent., during a period when inflation rates have fluctuated between 10 per cent. and 30 per cent. And then some Socialists have the impertinence to talk about a strike of private capital.
Let us take another yardstick. When one compares the gross figure of 3·3 per


cent. profitability on industrial capital with the return that one can obtain by investing in a short-dated British Government bond of 10½ per cent., one asks "Is it surprising that new capital investment in British industry from private sources is hard to come by?" We do not need a Wilson Committee to tell us that, or the reasons for it. The Government are directly responsible for this situation, which is one of the prime causes of rising unemployment.
In a healthy economy return on capital invested in new plant in industry should be at a rate about treble the interest paid on the National Debt, as it was when Mr. Harold Macmillan was Prime Minister and I first entered the House. Today, it is less than one-third. Until that is remedied by the most drastic changes in tax policy, there is no prospect of national recovery or a fall in the levels of unemployment.
A massive increase in the level of profitability of British business enterprises is the bedrock on which a recovery of our national prosperity must be founded. There can be no other. Yet almost everything this Government have done in the tax field and elsewhere, starting with their advance corporation tax in the very first of the Chancellor's 12 Budgets, has tended to reduce profitability and so to reduce investment and so to increase unemployment. That is why the latest figures about the money supply make particularly depressing reading.
To keep within their monetary target rate until April, the authorities will have to keep its increase over the coming three months down to the improbably small monthly average of 0·7 per cent. They should be moving towards the lower 9 per cent. limit of their bracket rather than overshooting the top of the target. If they are not very careful they will be driven to use higher short-term interest rates by again raising minimum lending rate, or to introduce supplementary special deposits. Either of those measures will tend still further to reduce new investment in British industry and thus to threaten employment prospects still more.
The basic underlying cause of all the Government's economic failures has been excessive public expenditure, which they

have had to struggle desperately to finance. One would have thought that by now they would have learned that lesson. Yet here they are again, according to their White Paper on public expenditure, apparently still resolved to allow public expenditure to grow at a faster rate than the likely growth of the gross domestic product, on even the most optimistic assumptions.
The vocabulary of the Left is full of references to those poor old cake-eating Bourbons who apparently learned nothing and forgot nothing, but somehow managed to govern France for several centuries. It sometimes seems to me that our latter-day jet-set Jacobins, here today and, I hope, gone tomorrow, labour under an even sadder disadvantage. They are not only incapable of learning; they are astonishingly quick to forget, particularly in matters of public expenditure. I am told that it is a state technically known as election amnesia.
So we are faced yet again with the prospect of higher public expenditure, supported only by stagnant industrial production, rising unemployment and a deteriorating trade balance—the four dread horsemen of the Socialist Apocalypse, all riding hard among us to disaster.

9.24 p.m.

The Minister of State, Treasury (Mr. Denzil Davies): May I deal first, Mr. Deputy Speaker, with one or two special points raised in the debate?
My hon. Friend the Member for Putney (Mr. Jenkins) asked about the taxation of literary awards and prizes. He has had correspondence with my right hon. Friend the Financial Secretary to the Treasury. Rather than venture into the field of taxation of copyrights and literary prizes, perhaps he will accept that I have noted what he said and that no doubt my right hon. Friend will also have done so.
My hon. Friend was one of the few speakers in the debate to mention the Meade Report. It is a very interesting and very well-documented report. We are looking at it and considering it. No doubt we shall be able to give a reaction to it when we have had a chance to consider it in depth. But at the end of the day, whatever tax structure is chosen, taxation questions have to be decided by


virtue of political considerations. They cannot, at the end of the day, be decided by matters of structure. These are questions of priority and they will always have to be faced, whatever the tax structure in this country.

Mr. Hugh Jenkins: I am sorry to interrupt my right hon. Friend so early in his speech, but what form is the Government's reaction to the Meade Report likely to take. Will it be the production of a Green Paper or something of that sort?

Mr. Davies: No decisions have been taken on that. The Treasury and the Inland Revenue are looking at the Meade Report, but nothing has been decided as to the form of our final conclusions.
The hon. Member for Worthing (Mr. Higgins) was one of the few speakers to mention money supply. He seemed to chastise the Government or to criticise us to some extent because in January the money supply had increased by more than 2 per cent. He tried to annualise that rate. There were, of course, many factors involved in the increase in the money supply in January. One of them was the reduction in taxation which took place as a result of the October measures and the increase in the personal allowances. If the hon. Gentleman is supporting the motion, as I gather he is, he must expect that an even higher increase in the money supply would result from it.
The hon. Gentleman also asked whether a reduction of £1½ billion in taxation next year would be consistent with the monetary guidelines. Perhaps I can ask him what monetary guidelines he would wish to see. It is not possible to determine the one without considering the other. I think he will appreciate that it is not a simple question of fitting a tax reduction into a monetary guideline. We have to consider what kind of monetary guideline is consistent with rates of inflation.
Several of my hon. Friends and Opposition Members asked about child benefits. As hon. Members will know, we have announced an increase to a weekly rate of £2·30 in April 1978, at a cost of £300 million. For most families—there are exceptions—this increase is likely to maintain in real terms the April 1973 level of family support. Beyond that, we are

committed to phasing out the under-11 rate of child tax allowances in April 1979. The hon. Member for Cornwall, North (Mr. Pardoe) would like us to do it a year sooner, but we are committed to doing it in 1979, and the further residual child tax allowances for older children will be dealt with as soon as possible thereafter.
As to the possibility of a further increase in child benefits in the Budget, naturally I cannot anticipate my right hon. Friend's statement, but I can say in relation to child benefit that cost is clearly one important factor. Since every 10p on the child benefit rate over and above the switch from child tax allowances costs some £60 million a year, the rates of £3·30 in November this year and £4·50 in April 1979, which have been suggested, would cost £240 million in 1978–79 and about £900 million in the following year.

Mr. Peter Bottomley: Will the Minister repeat his assurance that, with the increase in child benefit in April, the level of family support will be at the same real level as it was in April 1973? Secondly, cannot he understand that by raising child benefit he will be doing more to increase the incentive to work for most of the families who are somewhere near the poverty trap or in it, because it applies only to people with children?

Mr. Davies: I fully appreciate the importance of child benefit to people who have children. I can give the assurance that in real terms, for most families—there may be exceptions—when we take into account the April 1978 increase which will come about, this will maintain the April 1973 level of family support.
The official Opposition's motion is the usual simplistic kind that we have now come to expect from them, especially during the few months before a Budget. Not only does it re-emphasise the primeval Tory incantation "Tax cuts good, public expenditure bad", but no attempt is made in the motion to relate tax policy to monetary policy—we heard nothing about that—inflation or the balance of payments. Substantial cuts in direct taxation not only this year but on a continuing basis as the motion demands could very well have profound and damaging effects both for the balance of payments and for financial stability, and yet little attempt is made by the Opposition to


follow through the consequences of this action.
One is again reminded of the events of 1972–73 when the balance of payments and monetary policy were ignored completely by the Tory Government in the general stampede to cut direct taxes regardless of the consequences. It has taken almost four years to put right those excesses, but clearly during those four years the Tory Opposition have still learnt nothing. I shall say nothing about the Bourbons.
As my right hon. Friend the Chancellor has said, both at the lower and at the higher ends of the tax scale marginal rates are too high. We accept this, and now that financial stability has been restored and the rate of inflation is falling there is room gradually for a further reduction. That is why in October my right hon. Friend brought forward the indexation provision of the 1977 Finance Act and increased the personal allowances in the middle of this fiscal year.
Both in his Budget last spring and in October, my right hon. Friend referred to two objectives in the area of direct taxes to which he attached priority. The first was to lift tax thresholds—by increasing the real value of the personal allowances—so that they stood clear of the main social security benefits. The second was the introduction of a band of income charged at a lower rate. Both of these are clearly desirable, and both could make a major contribution towards reducing the burden of direct tax, on the lower paid especially. These are, of course, matters to which my right hon. Friend will be giving close consideration over the next few months before the Budget.
Since these matters were raised in the debate, perhaps I may try to set out the main advantages and disadvantages of raising thresholds as against introducing a lower rate band. There are a number of good reasons why a lower rate band should be introduced.
First, there is no doubt—we accept this—that our onset rate of 34 per cent., which with national insurance contributions approaches 40 per cent., is high in comparison with that in other countries. It may be that in practice what matters for any taxpayer is the average or the

effective rate paid on his income rather than either the onset rate on his first slice of income or the marginal rate on his top slice of income. Even if a fairly generous lower rate band were introduced, it would still be the case that for most taxpayers the marginal rate would continue to be the basic rate. Nevertheless, people are often aware of marginal and onset rates of tax but are not aware of the actual rates which they have to pay.
Second, the general structure of our income tax system in this regard is unsatisfactory. The length of our basic rate band, before higher graduated rates start to apply, is again unusual by comparison with most other countries. There is a good case for a more gradual rise to the basic rate level. It would not, of course, be possible to change completely our tax structure overnight. A lower rate band is an expensive matter—a band of £1,000, as the House well knows, at 25 per cent. would cost approximately £2 billion.
Both these points are advantages which are peculiar to a lower rate band and are not shared by an increase in tax allowances. When we come to the actual distributional effects and the distributional consequences, the position is not as straightforward. If one compares the amount of revenue in respect of personal allowances being increased and a new rate band being introduced, the consequences are different for different kinds of taxpayers.
As my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) said, quite rightly, for taxpayers with the very lowest incomes an increase in allowances is better because it takes them out of tax altogether. A lower rate band leaves the number of taxpayers unaffected. For single people and earning wives, once their incomes exceed the threshold by a few hundred pounds, until they are into the higher rates of tax a lower rate band would be more advantageous than an increase in thresholds. Those benefiting would also include a substantial number of young people and part-time workers. Married men, if their wives' earnings were excluded, would, however, do better from an increase in thresholds. The difference might not be very great at basic rate levels of income, but it is still a significant difference.
There is also the question of incentives at lower income levels. Here a lower rate, since it takes no one out of tax, does nothing to reduce the numbers affected by the poverty trap, although it would secure a useful reduction in the marginal rate of what is known as implied tax. In contrast, an increase in thresholds by taking people with the lowest incomes out of tax altogether reduces the numbers affected by the poverty trap. It is arguable whether it is preferable to take the lowest paid out of the poverty trap altogether or to mitigate its effects for those caught in the trap without reducing their numbers.
Of course, the ideal solution is to increase thresholds substantially and to introduce a lower rate band. But this, as the House knows, would be extremely expensive. So the question has to be faced whether we want to take a given number of people out of tax completely or to reduce the rate of tax for those at the lower end of the scale without taking them out of the tax net.

Mr. Lewis Carter-Jones: Is it not absurd that the Government should be paying to disabled people and war widows money on which they have to pay tax? Is not it true, therefore, that the threshold should be raised?

Mr. Davies: I accept that entirely. If the threshold is raised, persons of that kind are taken out of the tax bracket altogether. On the other hand, if we have a lower rate band they are not taken out of the tax bracket, but at least they enter the tax system at a lower rate.

Mr. Higgins: Given the horrible mess that the Government have got into on the poverty trap, is not the Minister sorry that he did not introduce a tax credit scheme along the lines proposed by the previous Government?

Mr. Davies: I am sure that the hon. Gentleman will not expect me to pursue the question of tax credits. The real problem has been caused by inflation, and it cannot be solved merely by playing around with the tax system. The first priority is to reduce the rate of inflation.

Mr. Patrick Cormack: Does not the Minister accept that there are certain measures which could be be taken at minimal cost?

Recently, the Chancellor of the Exchequer indicated to me that if the highest rate of tax on earned income was 50 per cent. the cost to the Exchequer would be £250 million a year, and that if widows under 65 years of age were allowed up to £3,000 a year without tax, the cost would be £60 million. Measures such as that could be taken without vast cost.

Mr. Davies: Many measures could be taken, and in themselves the cost would not be vast, but when they were added together, one would find that, as always, they came to a quite considerable amount.
The Liberal Party's amendment suggests that direct tax cuts could be financed by increasing indirect taxes, and the hon. Member for Cornwall, North (Mr. Pardoe) amplified upon it in his speech. However, hon. Members should be clear about the effect of this on the level of prices. To increase the excise duties to keep pace with inflation in the last year would mean a penny on a pint of beer, which would be about 0·2 per cent. on the retail price index. Comparable increases on fortified wine and spirits would be 12p and 32p a bottle respectively, adding about 0·1 per cent. each to the index. An inflation-linked increase in the petrol duty would mean putting 3p on a gallon of petrol, which would increase the index by 0·1 per cent. On the other hand, it would mean an increase of 4p on a packet of 20 cigarettes, putting no less than 0·4 per cent. on the retail price index.
Revalorising all these taxes and excise duties would put about 1 per cent. on the RPI and would raise about £400 million. The unification of VAT, which the hon. Gentleman also advocated, at a standard rate of 10 per cent. would raise the RPI by almost 1 per cent. and would raise about £600 million in revenue. Therefore, at a cost of between 1½ and 2 per cent. on the RPI it would be possible to reduce, for example, the basic rate of tax by about 2p. Whether it is worth putting up prices by almost 2 per cent. to get that kind of reduction in the basic rate is a matter of argument and debate as to whether one considers the RPI more im-important than direct taxation.

Mr. Pardoe: Would the right hon. Gentleman agree that a high level of income tax by increasing wage push works through to the RPI just as effectively,


though not as quickly, as any increases in taxation on expenditure, and, therefore, that for the Labour Government to tie themselves to the god of RPI is against the best interests of the British economy?

Mr. Davies: I agree that direct taxation can affect take-home pay and inflationary pressure, and I am not suggesting any trade-off. I am merely pointing out that if these excise duties were revalorised, and VAT unified at 10 per cent., which could mean increasing the RPI by 2 per cent., this would be the effect.

Mr. Burden: Will the right hon. Gentleman tell us how much the British taxpayer has to find in interest for funding or paying interest on the $20 billion borrowed by this Government and whether, if that amount of interest were otherwise available, it could be used in easing taxation in this country?

Mr. Davies: The hon. Gentleman will have to put down a Question, to which he will get a clear and concise answer.
The hon. Member for Cornwall, North spoke of revalorising excise duties. I remind him that since 1974 the RPI has increased by 85 per cent. If one looks at excise duties over the same period, one sees that the duty on table wine has been increased by 333 per cent., on fortified wine by 199 per cent., on beer by 141 per cent., on spirits by 75 per cent., on tobacco by 133 per cent. and on petrol by 33 per cent. I gather that the hon. Gentleman may be changing his mind in respect of petrol duty.
At least, the Liberal Party spokesman recognised that there was a financing problem, if I may so describe it, in cutting direct taxation. He called for a cut of 9p in the standard rate, which, I gather would cost about £4½ billion, but his figures did not add up. The gap would amount to about £3 billion. Presumbaly, he wishes to reflate by that amount. Of the Liberal attitude and the Liberal amendment, one can say that at least the Liberals recognise that there is a problem even if on this occasion their sums do not add up.
The first thing to be said about the Tory motion is that it ignores most theories of economic policy except taxation. There is the usual old-fashioned dislike of public enterprise, a dislike

which the right hon. Member for Worcester (Mr. Peter Walker) has rightly condemned recently. He put it very well, so I do not do any injury to him if I quote from his excellent speech, reported in The Guardian on Friday last. It appeared under a headline which was not his work,
Root out old dogmas, Walker tells Tories".
The right hon. Member put it very well.
He said:
It is a depressing spectacle to watch a small, but vocal and apparently influential section of the Tory Party bow down to worship the free market gods which brought so much squalor, so many slums, so much social divisiveness and injustice.'
That is what the right hon. Member thinks about the small but vocal group that now seems to be so influential in Tory Party policy.
There is, of course, a case for reducing taxes further in the coming fiscal year, both to help those at the bottom of the tax scale and to increase take-home pay so as to reduce further inflationary pressures. But we on the Government side of the House do not accept the implication in the Tory motion and the Tory speeches that we have heard tonight that somehow public expenditure is bad and cuts in direct taxation are good. In a modern, complex society there must be a high and adequate level of public services, and most of this must be financed by taxation.
The Opposition motion calls for substantial and continuing reductions in taxation, but, of course, it is silent, as Opposition speakers were silent, on how these reductions are to be financed. Are they to be financed by cutting public expenditure? We have not been told tonight. We were not told in the recent debate when Opposition Members were challenged by my right hon. Friend the Chief Secretary. We were told then to wait and see. We are still waiting, but we still cannot see what the Tory Party would do in respect of public expenditure. But if the Tories wish to reduce tax levels by £5 billion to what they were in 1973, I fail to see how they can do that without drastic cuts in public expenditure.
However, let us give the Tories the benefit of the doubt. Let us suppose that they do not want to cut public expenditure. How would they finance continuing


reductions in taxation? There are only two ways of doing it—by borrowing in the market or by printing money. [An HON. MEMBER: "Or by increasing production."] Some hon. Members are unaware, as the Tory Government were in 1974, of the financial mechanisms of this country and how these things work.
If the Tories are to finance reductions in direct taxation either by printing money or by borrowing more, they should tell us the effect that that will have on the financial markets. One does not have to be a slavish follower of Milton Friedman to accept that there must be some relationship between fiscal and monetary policy. Yet Opposition Front Bench Members, who preach monetarism when they are in Opposition, have shown a complete disregard in the motion of the monetary effects of the kind of fiscal boost which they seek by reductions in direct taxation.

Mr. John Mendelson: With the approval certainly of Labour Members, my right hon. Friend is accusing Opposition Members of preaching monetarism when in Opposition. Are not his own Government subject to the possible charge that we are preaching Keynesianism when in Opposition and resorting to Friedmanism when in power?

Mr. Davies: I think that the answer to my hon. Friend is, as I have said, that there must be a relationship between fiscal policy and monetary policy. The one must have some effect on the other. I think that the difficulty of economic policy is to steer a middle course between the one and the other.
However, when in Opposition Conservative Members preach monetarism. Perhaps I may quote again that member of the small influential group who is not in his place at present, although I think that he will be here soon. Perhaps he is consulting that group. This is what the hon. Member for Blaby (Mr. Lawson) said to my right hon. Friend the Chancellor of the Exchequer on 10th November when my right hon. Friend introduced his measures to reduce the tax thresholds:
There is no way in which the right hon. Gentleman's fiscal boost can be a boost if he is holding the money supply constant. I think that he is right to hold the money supply constant because of the overriding importance of the battle against inflation".—[Official

Report, 10th December 1977; Vol. 938, c. 982.]
If the Opposition are calling for substantial cuts in taxation and for fiscal boosts, how can they do that and keep the money supply constant?
The hon. Member for Horncastle (Mr. Tapsell) spoke of a 9 per cent. money supply target next year. He said that he wanted to see the target reduced to 9 per cent., but how can he do this and at the same time call for the fiscal boosts referred to in the motion?

Mr. Tapsell: I am sure that the Minister would not try to misrepresent me. When he reads Hansard in the morning, he will see that I said that instead of overshooting the top end of the target the Government should work towards the bottom end. That is not laying down any policy for targets for next year.

Mr. Davies: The hon. Member said that one must work down from the top end of 13 per cent. to the bottom end of 9 per cent. How can he do this if he wants the fiscal boost that the motion calls for?
At least I understood the sentiments of the right hon. Member for Leeds, North-East (Sir K. Joseph), who in a lecture at Oxford, as reported in The Observer on 12th February, called for a smaller increase in the money supply in 1978–79 than this year. He wanted lower targets. But how could this be achieved if the policies in the motion were put into effect? I suppose that the right hon. Member will not support the motion.
There is another way that this reduction could be financed, and that is by very high interest rates. That is the only way that stock could be sold in the markets, assuming that it could be sold at all. But that would stifle economic activity and investment and it would lead to the printing of money again. Then we would be back to the 1972–73 situation, with all its inflationary consequences.
One fact is clear. Whether the Conservatives intend to finance tax cuts by cutting public expenditure, by printing money or by high interest rates, the fact is that the effect on the economy—especially on employment, inflation and investment—would be extremely damaging. This action would be least likely to produce the hard work called for in the


motion. The last time a Tory Government embarked on such a course, most of the benefit went to those who did very little work.
The Opposition motion makes little reference to the effect of a substantial and continuing reduction in direct taxation on the balance of payments. During the so-called Barber boom—or perhaps it should have been called the Barber bust—a substantial amount of money handed back in tax cuts went into imports, with disastrous results for the balance of payments. No attempt has been made in the motion or by any Opposition speakers to consider the effects of substantial taxation cuts on the balance of payments.
There is one final way in which the Opposition could finance tax cuts—by using revenue from North Sea oil. In a famous interview which the Leader of the Opposition gave to Brian Walden on 18th September last year, the right hon. Lady gave an assurance that she did not intend to cut public expenditure to finance tax incentives. The interview went something like this—and I quote part of the transcript:
Mrs. Thatcher: 'There is a gap between giving the incentives and getting extra output and getting the extra work. It is what happens in that gap that is worrying.'
Mr. Walden: 'What does happen in the gap?'
Mrs. Thatcher: 'Well, one moment. There is one thing that you did not take into account

at all. North Sea oil will make a difference because it is going to bring in extra revenue.'"

I suppose that if the Conservatives did not finance taxation cuts by public expenditure cuts, high interest rates or printing money, they could do it somehow using the benefits of North Sea oil. The extra purchasing power going into imports would damage further our manufacturing capacity, and when the oil ran out all we would have would be a pile of scrap in the shape of consumer goods. It would not be the first time that the Tory Party has frittered away the wealth of the nation, but I very much doubt whether on this occasion the British people would give them the opportunity to do so again.

I ask the House to reject the motion because it is merely about taxation and does not attempt to assess the consequences of what the motion calls for. I ask the House to reject it because it demonstrates again a lack of understanding by the present Tory leadership of our industrial and social problems. It also demonstrates how irrelevant are the policies of the present leadership—not the whole of the Tory Party—to the needs and aspirations of a modern Britain. I ask the House to oppose the motion.

Question put, That the amendment be made:—

The House divided: Ayes 275, Noes 247.

Forrester, John
Lyon, Alexander (York)
Rowlands, Ted


Fowler, Gerald (The Wrekin)
Mabon, Rt Hon Dr J. Dickson
Ryman, John


Fraser, John (Lambeth, N'w'd)
McCartney, Hugh
Sandelson, Neville


Freeson, Rt Hon Reginald
McDonald, Dr Oonagh
Sedgemore, Brian


Garrett, John (Norwich S)
McElhone, Frank
Selby, Harry


Garrett, W. E. (Wallsend)
MacFarquhar, Roderick
Sever, John


George, Bruce
McGuire, Michael (Ince)
Shaw, Arnold (Ilford South)


Gilbert, Rt Hon Dr John
MacKenzie, Rt Hon Gregor
Sheldon, Rt Hon Robert


Ginsburg, David
Maclennan, Robert
Shore, Rt Hon peter


Golding, John
McMillan, Tom (Glasgow C)
Short, Mrs Renée (Wolv NE)


Gourlay, Harry
McNamara, Kevin
Silkin, Rt Hon John (Deptford)


Graham, Ted
Madden, Max
Silkin, Rt Hon S. C (Dulwich)


Grant, George (Morpeth)
Magee, Bryan
Sillars, James


Grant, John (Islington C)
Mallalieu, J. P. W.
Skinner, Dennis


Grocott, Bruce
Marks, Kenneth
Smith, John (N Lanarkshire)


Hardy, Peter
Marshall, Dr Edmund (Goole)
Snape, Peter


Harrison, Rt Hon Walter
Marshall, Jim (Leicester S)
Spearing, Nigel


Hart, Rt Hon Judith
Maynard, Miss Joan
Spriggs, Leslie


Hattersley, Rt Hon Roy
Meacher, Michael
Stallard, A. W.


Hayman, Mrs Helene
Mellish, Rt Hon Robert
Stewart, Rt Hon M. (Fulham)


Healey, Rt Hon Denis
Mendelson, John
Stoddart, David


Heffer, Eric S.
Mikardo, Ian
Stott, Roger


Hooley, Frank
Millan, Rt Hon Bruce
Strang, Gavin


Horam, John
Miller, Dr M. S. (E Kilbride)
Strauss, Rt Hon G. R.


Hoyle, Doug (Nelson)
Mitchell, Austin
Summerskill, Hon Dr Shirley


Huckfield, Les
Molloy, William
Swain, Thomas


Hughes, Rt Hon C. (Anglesey)
Morris, Alfred (Wythenshawe)
Taylor, Mrs Ann (Bolton W)


Hughes, Robert (Aberdeen N)
Morris, Rt Hon Charles R.
Thomas, Jeffrey (Abertillery)


Hughes, Roy (Newport)
Morris, Rt Hon J. (Aberavon)
Thomas, Mike (Newcastle E)


Hunter, Adam
Moyle, Roland
Thomas, Ron (Bristol NW)


Irvine, Rt Hon Sir A. (Edge Hill)
Mulley, Rt Hon Frederick
Thorne, Stan (Preston South)


Irving, Rt Hon S. (Dartford)
Murray, Rt Hon Ronald King
Tinn, James


Jackson, Colin (Brighouse)
Newens, Stanley
Tomlinson, John


Jackson, Miss Margaret (Lincoln)
Noble, Mike
Tomney, Frank


Janner, Greville
Oakes, Gordon
Torney, Tom


Jay, Rt Hon Douglas
Ogden, Eric
Tuck, Rapheal


Jeger, Mrs Lena
O' Halloran, Michael
Wainwright, Edwin (Dearne V)


Jenkins, Hugh (Putney)
Orbach, Maurice
Walker, Harold (Doncaster)


John, Brynmor
Orme, Rt Hon Stanley
Walker, Terry (Kingswood)


Johnson, James (Hull West)
Ovenden, John
Ward, Michael


Johnson, Walker (Derby S)
Owen, Rt Hon Dr David
Watkins, David


Jones, Alec (Rhondda)
Padley, Walter
Watkinson, John


Jones, Barry (East Flint)
Palmer, Arthur
Weetch, Ken


Jones, Dan (Burnley)
Park, George
Weitzman, David


Judd, Frank
Parker, John
Wellbeloved, James


Kaufman, Gerald
Parry, Robert
White, Frank R. (Bury)


Kelley, Richard
Pavitt, Laurie
White, James (Pollok)


Kerr, Russell
Perry, Ernest
Whitehead, Phillip


Kilroy-Silk, Robert
Phipps, Dr Colin
Whitlock, William


Kinnock, Neil
Price, C. (Lewisham W)
Wigley, Dafydd


Lambie, David
Price, William (Rugby)
Willey, Rt Hon Frederick


Lamborn, Harry
Radice, Giles
Williams, Rt Hon (Swansea W)


Lamond, James
Ress, Rt Hon Merlyn (Leeds S)
Williams, Rt Hon Shirley (Hertford)


Latham, Arthur (Paddington)
Richardson, Miss Jo
Williams, Sir Thomas (Warrington)


Leadbitter, Ted
Roberts, Albert (Normanton)
Wilson, Alexander (Hamilton)


Lee, John
Roberts, Gwilym (Cannock)
Wilson, Rt Hon Sir Harold (Huyton)


Lestor, Miss Joan (Eton amp; Slough)
Robertson, John (Paisley)
Wilson, William (Coventry SE)


Lever, Rt Hon Harold
Robinson, Geoffrey
Wise, Mrs Audrey


Lewis, Arthur (Newham N)
Roderick, Caerwyn
Woof, Robert


Lewis, Ron (Carlisle)
Rodgers, George (Chorley)
Young, David (Bolton E)


Litterick, Tom
Rodgers, Rt Hon William (Stockton)



Lomas, Kenneth
Rooker, J. W.
TELLERS FOR THE AYES:


Loyden, Eddie
Rose, Paul B.
Mr. James Hamilton and


Luard, Evan
Ross, Rt Hon W. (Kilmarnock)
Mr. Joseph Harper.




NOES


Adley, Robert
Bowden, A. (Brighton, Kemptown)
Churchill, W. S.


Aitken, Jonathan
Boyson, Dr Rhodes (Brent)
Clark, Alan (Plymouth, Sutton)


Alison, Michael
Braine, Sir Bernard
Clark, William (Croydon S)


Amery, Rt Hon Julian
Brittan, Leon
Clarke, Kenneth (Rushcliffe)


Atkins, Rt Hon (Spelthorne)
Brocklebank-Fowler, C.
Clegg, Walter


Atkinson, David (Bournemouth, East)
Brooke, Peter
Cockroft, John


Awdry, Daniel
Brotherton Michael
Cooke, Robert (Bristol W)


Baker, Kenneth
Brown, Sir Edward (Bath)
Cope, John


Banks, Robert
Bryan, Sir Paul
Cormack, Patrick


Bennett, Sir Frederic (Torbay)
Buchanan-Smith, Alick
Costain, A. P.


Bennett, Dr Reginald (Fareham)
Buck, Antony
Critchley, Julian


Benyon, W.
Budgen, Nick
Crouch, David


Berry, Hon Anthony
Bulmer, Esmond
Crowder, F. P.


Biggs-Davison, John
Burden, F. A.
Davies, Rt Hon J. (Knutsford)


Blaker, Peter
Butler, Adam (Bosworth)
Dean, Paul (N Somerset)


Body, Richard
Carlisle, Mark
Dodsworth Geoffrey


Boscawen, Hon Robert
Chalker, Mrs Lynda
Douglas-Hamilton, Lord James


Bottomley, Peter
Channon, Paul
Drayson, Burnaby







du Cann, Rt Hon Edward
Kilfedder, James
Rathbone, Tim


Durant, Tony
Kimball, Marcus
Rawlinson, Rt Hon Sir Peter


Dykes, Hugh
King, Evelyn (South Dorset)
Rees, Peter (Dover amp; Deal)


Edwards, Nicholas (Pembroke)
King Tom (Bridgwater)
Renton, Rt Hon Sir D. (Hunts)


Elliott, Sir William
Kitson, Sir Timothy
Renton, Tim (Mid-Sussex)


Emery, Peter
Knight, Mrs Jill
Rhodes James, R.


Eyre, Reginald
Knox, David
Ridley, Hon Nicholas


Fairbairn, Nicholas
Lamont, Norman
Ridsdale, Julian


Fairgrieve, Russell
Langford-Holt, Sir John
Rifkind, Malcolm


Farr, John
Latham, Michael (Melton)
Roberts, Wyn (Conway)


Fell, Anthony
Lawrence, Ivan
Rossi, Hugh (Hornsey)


Finsberg, Geoffrey
Lawson, Nigel
Rost, Peter (SE Derbyshire)


Fletcher, Alex (Edinburgh N)
Lester, Jim (Beeston)
Royle, Sir Anthony


Fookes, Miss Janet
Lewis, Kenneth (Rutland)
Sainsbury, Tim


Forman, Nigel
Lloyd, Ian
St. John-Stevas, Norman


Fowler, Norman (Sutton C'f'd)
Loveridge, John
Scott, Nicholas


Fox, Marcus
Luce, Richard
Shaw, Giles (Pudsey)


Fraser, Rt Hon H. (Stafford amp; St)
McAdden, Sir Stephen
Shelton, William (Streatham)


Fry, Peter
McCrindle, Robert
Shersby, Michael


Galbraith, Hon T. G. D.
Macfarlane, Neil
Silvester, Fred


Gardiner, George (Reigate)
MacGregor, John
Sims, Roger


Gardner, Edward (S Fylde)
MacKay, Andrew (Stechford)
Sinclair, Sir George


Gilmour, Rt Hon Ian (Chesham)
Macmillan, Rt Hon M. (Farnham)
Skeet, T. H. H.


Gilmour, Sir John (East Fife)
McNair-Wilson, M. (Newbury)
Smith, Dudley (Warwick)


Glyn, Dr Alan
McNair-Wilson, P. (New Forest)
Smith, Timothy John (Ashfield)


Godber, Rt Hon Joseph
Madel, David
Speed, Keith


Goodhart, Philip
Marshall, Michael (Arundel)
Spence, John


Goodhew, Victor
Mates, Michael
Spicer, Michael (S Worcester)


Gorst, John
Mather, Carol
Sproat, Iain


Gow, Ian (Eastbourne)
Maude, Angus
Stainton, Keith


Gower, Sir Raymond (Barry)
Maudling, Rt Hon Reginald
Stanbrook, Ivor


Grant, Anthony (Harrow C)
Mawby, Ray
Stanley, John


Gray, Hamish
Maxwell-Hyslop, Robin
Steen, Anthony (Wavertree)


Grieve, Percy
Mayhew, Patrick
Stewart, Ian (Hitchin)


Griffiths, Eldon
Meyer, Sir Anthony
Stokes, John


Grist, Ian
Miller, Hal (Bromsgrove)
Stradling Thomas, J.


Grylls, Michael
Miscampbell, Norman
Tapsell, Peter


Hall-Davis, A. G. F.
Mitchell, David (Basingstoke)
Taylor, R. (Croydon NW)


Hamilton, Michael (Salisbury)
Moate, Roger
Taylor, Teddy (Cathcart)


Hampson, Dr Keith
Monro, Hector
Tebbit, Norman


Hannam, John
Montgomery, Fergus
Temple-Morris, Peter


Harrison, Col Sir Harwood (Eye)
Moore, John (Croydon C)
Thatcher, Rt Hon Margaret


Haselhurst, Alan
More, Jasper (Ludlow)
Thomas, Rt Hon P. (Hendon S)


Hastings, Stephen
Morgan, Geraint
Townsend, Cyril D.


Havers, Rt Hon Sir Michael
Morgan-Giles, Rear-Admiral
Trotter, Neville


Hawkins, Paul
Morris, Michael (Northampton S)
van Straubenzee, W. R.


Hayhoe, Barney
Morrison, Charles (Devizes)
Vaughan, Dr Gerard


Higgins, Terence L.
Morrison, Hon Peter (Chester)
Viggers, Peter


Hodgson, Robin
Mudd, David
Wakeham, John


Holland, Philip
Neave, Airey
Walder, David (Clitheroe)


Hordern, Peter
Nelson, Anthony
Walker, Rt Hon P. (Worcester)


Howe, Rt Hon Sir Geoffrey
Neubert, Michael
Wall, Patrick


Howell, David (Guildford)
Newton, Tony
Walters, Dennis


Hunt, David (Wirral)
Onslow, Cranley
Weatherill, Bernard


Hunt, John (Ravensbourne)
Oppenheim, Mrs Sally
Wells, John


Hurd, Douglas
Page, John (Harrow West)
Whitelaw, Rt Hon William


Hutchison, Michael Clark
Page, Richard (Workington)
Wiggin, Jerry


Irving, Charles (Cheltenham)
Parkinson, Cecil
Winterton, Nicholas


Jenkin, Rt Hon P. (Wanst'damp;W'df'd)
Pattie, Geoffrey
Wood, Rt Hon Richard


Jessel, Toby
Percival, Ian
Young, Sir G. (Ealing, Acton)


Johnson Smith, G. (E Grinstead)
Peyton, Rt Hon John
Younger, Hon George


Jones, Arthur (Daventry)
Pink, R. Bonner



Joseph, Rt Hon Sir Keith
Prentice, Rt Hon Reg
TELLERS FOR THE NOES:


Kaberry, Sir Donald
Price, David (Eastleigh)
Mr. Spencer Le Marchant and


Kellett-Bowman, Mrs Elaine
Pym, Rt Hon Francis
Mr. Michael Roberts.


Kershaw, Anthony
Raison, Timothy

Question accordingly agreed to.

Main Question, as amended, put:—

Division No.122]
AYES
[10.14 p.m.


Abse, Leo
Bates, Alf
Brown, Hugh D. (Provan)


Allaun, Frank
Bean, R. E.
Brown, Robert C. (Newcastle W)


Anderson, Donald
Bennett, Andrew (Stockport N)
Buchan, Norman


Archer, Rt Hon Peter
Bidwell, Sydney
Buchanan, Richard


Armstrong, Ernest
Bishop, Rt Hon Edward
Butler, Mrs Joyce (Wood Green)


Ashley, Jack
Boardman, H.
Callaghan, Rt Hon J. (Cardiff SE)


Ashton, Joe
Booth, Rt Hon Albert
Callaghan, Jim (Middleton amp; P)


Atkins, Ronald (Preston N)
Boothroyd, Miss Betty
Campbell, Ian


Atkinson, Norman
Bottomley, Rt Hon Arthur
Canavan, Dennis


Bagier, Gordon A. T.
Boyden, James (Bish Auck)
Cant, R. B.


Barnett, Guy (Greenwich)
Bradley, Tom
Carmichael, Neil


Barnett, Rt Hon Joel (Heywood)
Bray, Dr Jeremy
Carter, Ray

The House divided: Ayes 274, Noes 248.

Carter-Jones, Lewis
Irving, Rt Hon S. (Dartford)
Phipps, Dr Colin


Castle, Rt Hon Barbara
Jackson, Colin (Brighouse)
Price, C. (Lewisham W)


Clemitson, Ivor
Jackson, Miss Margaret (Lincoln)
Price, William (Rugby)


Cocks, Rt Hon Michael (Bristol S)
Janner, Greville
Radice, Giles


Cohen, Stanley
Jay, Rt Hon Douglas
Rees, Rt Hon Merlyn (Leeds S)


Coleman, Donald
Jeger, Mrs Lena
Richardson, Miss Jo


Colquhoun, Ms Maureen
Jenkins, Hugh (Putney)
Roberts, Albert (Normanton)


Concannon, J. D.
John, Brynmor
Roberts, Gwilym (Cannock)


Conlan, Bernard
Johnson, James (Hull West)
Roberts, Wyn (Conway)


Cook, Robin F. (Edin C)
Johnson, Walter (Derby S)
Robertson, John (Paisley)


Corbett, Robin
Jones, Alec (Rhondda)
Robinson, Geoffrey


Cowans, Harry
Jones, Barry (East Flint)
Roderick, Caerwyn


Cox, Thomas (Tooting)
Jones, Dan (Burnley)
Rodgers, George (Chorley)


Craigen, Jim (Maryhill)
Judd, Frank
Rodgers, Rt Hon William (Stockton)


Crawshaw, Richard
Kaufman, Gerald
Rooker, J. W.


Cronin, John
Kerr, Russell
Rose, Paul B.


Crowther, Stan (Rotherham)
Kilroy-Silk, Robert
Ross, Rt Hon W. (Kilmarnock)


Cryer, Bob
Kinnock, Neil
Rowlands, Ted


Cunningham, G. (Islington S)
Lambie, David
Ryman, John


Cunningham, Dr J. (Whiteh)
Lamborn, Harry
Sandelson, Neville


Davidson, Arthur
Lamond, James
Sedgemore, Brian


Davies, Bryan (Enfield N)
Latham, Arthur (Paddington)
Selby, Harry


Davies, Denzil (Llanelli)
Leadbitter, Ted
Sever, John


Davis, Clinton (Hackney C)
Lee, John
Shaw, Arnold (Ilford South)


Deakins, Eric
Lestor, Miss Joan (Eton amp; Slough)
Sheldon, Rt Hon Robert


Dean, Joseph (Leeds West)
Lever, Rt Hon Harold
Shore, Rt Hon Peter


Dempsey, James
Lewis, Arthur (Newham N)
Silkin, Mrs Renée (Wolv NE)


Doig, Peter
Lewis, Ron (Carlisle)
Silkin, Rt Hon John (Deptford)


Dormand, J. D.
Litterick, Tom
Silkin, Rt Hon S. C. (Dulwich)


Douglas-Mann, Bruce
Lomas, Kenneth
Sillars, James


Duffy, A. E. P.
Loyden, Eddie
Skinner, Dennis


Dunn, James A.
Luard, Evan
Smith, John (N Lanarkshire)


Dunnett, Jack
Lyon, Alexander (York)
Snape, Peter


Eadie, Alex
Mabon, Rt Hon Dr J. Dickson
Spearing, Nigel


Ellis, John (Brigg amp; Scun)
McCartney, Hugh
Spriggs, Leslie


English, Michael
McDonald, Dr Oonagh
Stallard, A. W.


Ennals, Rt Hon David
McElhone, Frank
Stewart, Rt Hon M. (Fulham)


Evans, Fred (Caerphilly)
MacFarquhar, Roderick
Stoddart, David


Evans, Gwynfor (Carmarthen)
McGuire, Michael (Ince)
Stott, Roger


Evans, Ioan (Aberdare)
MacKenzie, Rt Hon Gregor
Strang, Gavin


Evans, John (Newton)
Maclennan, Robert
Strauss, Rt Hon G. R.


Ewing, Harry (Stirling)
McMillan, Tom (Glasgow C)
Summerskill, Hon Dr Shirley


Faulds, Andrew
McNamara, Kevin
Swain, Thomas


Fernyhough, Rt Hon E.
Madden, Max
Taylor, Mrs Ann (Bolton W)


Fitch, Alan (Wigan)
Magee, Bryan
Thomas, Jeffrey (Abertillery)


Fitt, Gerard (Belfast W)
Mallalieu, J. P. W.
Thomas, Mike (Newcastle E)


Flannery, Martin
Marks, Kenneth
Thomas, Ron (Bristol NW)


Fletcher, Ted (Darlington)
Marshall, Dr Edmund (Goole)
Thorne Stan (Preston South)


Foot, Rt Hon Michael
Marshall, Jim (Leicester S)
Tinn, James


Ford, Ben
Maynard, Miss Joan
Tomlinson, John


Forrester, John
Meacher, Michael
Tomney, Frank


Fowler, Gerald (The Wrekin)
Mellish, Rt Hon Robert
Torney, Tom


Fraser, John (Lambeth, N'w'd)
Mendelson, John
Tuck, Raphael


Freeson, Rt Hon Reginald
Mikardo, Ian
Wainwright, Edwin (Dearne V)


Garrett, John (Norwich S)
Millan, Rt Hon Bruce
Walker, Harold (Doncaster)


Garrett, W. E. (Wallsend)
Miller, Dr M. S. (E Kilbride)
Walker, Terry (Kingswood)


George, Bruce
Mitchell, Austin
Ward, Michael


Gilbert, Dr John
Moate, Roger
Watkins, David


Ginsburg, David
Molloy, William
Watkinson, John


Golding, John
Morris, Alfred (Wythenshawe)
Weetch, Ken


Gourlay, Harry
Morris, Charles R. (Openshaw)
Weitzman, David


Graham, Ted
Morris, Rt Hon J. (Aberavon)
Wellbeloved, James


Grant, George (Morpeth)
Moyle, Roland
White, Frank R. (Bury)


Grant, John (Islington C)
Mulley, Rt Hon Frederick
White, James (Pollok)


Grocott, Bruce
Murray, Rt Hon Ronald King
Whitehead, Phillip


Hardy, Peter
Newens, Stanley
Whitlock, William


Harrison, Rt Hon Walter
Noble, Mike
Wigley, Dafydd


Hart, Rt Hon Judith
Oakes, Gordon
Willey, Rt Hon Frederick


Hattersley, Rt Hon Roy
Ogden, Eric
Williams, Rt Hon Alan (Swansea w)


Hayman, Mrs Helene
O'Halloran, Michael
Williams, Rt Hon Shirley (Hertford)


Healey, Rt Hon Denis
Orbach, Maurice
Williams, Sir Thomas (Warrington)


Heffer, Eric S.
Orme, Rt Hon Stanley
Wilson, Alexander (Hamilton)


Hooley, Frank
Ovenden, John
Wilson, Rt Hon Sir Harold (Huyton)


Horam, John
Owen, Rt Hon Dr David
Wilson, William (Coventry SE)


Hoyle, Doug (Nelson)
Padley, Walter
Wise, Mrs Audrey


Huckfield, Les
Palmer, Arthur
Woof, Robert


Hughes, Rt Hon C. (Anglesey)
Park, George
Young, David (Bolton E)


Hughes, Robert (Aberdeen N)
Parker, John



Hughes, Roy (Newport)
Parry, Robert
TELLERS FOR THE AYES:


Hunter, Adam
Pavitt, Laurie
Mr. James Hamilton and


Irvine, Rt Hon Sir A. (Edge Hill)
Perry, Ernest
Mr. Joseph Harper.




NOES


Adley, Robert
Alison, Michael
Atkins, Rt Hon H. (Spelthorne)


Aitken, Jonathan
Amery, Rt Hon Julian
Atkinson, David (Bournemouth, East)







Awdry, Daniel
Grieve, Percy
Nelson, Anthony


Baker, Kenneth
Griffiths, Eldon
Neubert, Michael


Banks, Robert
Grist, Ian
Newton, Tony


Bennett, Sir Frederic (Torbay)
Grylls, Michael
Onslow, Cranley


Bennett, Dr Reginald (Fareham)
Hall-Davis, A. G. F.
Oppenheim, Mrs Sally


Benyon, W.
Hamilton, Michael (Salisbury)
Page, John (Harrow West)


Berry, Hon Anthony
Hampson, Dr Keith
Page, Richard (Workington)


Biggs-Davison, John
Hannam, John
Parkinson, Cecil


Blaker, Peter
Harrison, Col Sir Harwood (Eye)
Pattie, Geoffrey


Body, Richard
Haselhurst, Alan
Percival, Ian


Boscawen, Hon Robert
Hastings, Stephen
Peyton, Rt Hon John


Bottomley, Peter
Havers, Rt Hon Sir Michael
Pink, R. Bonner


Bowden, A. (Brighton, Kemptown)
Hawkins, Paul
Prentice, Rt Hon Reg


Boyson, Dr. Rhodes (Brent)
Hayhoe, Barney
Price, David (Eastleigh)


Braine, Sir Bernard
Higgins, Terence L.
Pym, Rt Hon Francis


Brittan, Leon
Hodgson, Robin
Raison, Timothy


Brocklebank-Fowler, C.
Holland, Philip
Rathbone, Tim


Brooke, Peter
Hordern, Peter
Rawlinson, Rt Hon Sir Peter


Brotherton, Michael
Howe, Rt Hon Sir Geoffrey
Rees, Peter (Dover amp; Deal)


Brown, Sir Edward (Bath)
Howell, David (Guildford)
Renton, Rt Hon Sir D. (Hunts)


Bryan, Sir Paul
Hunt, David (Wirral)
Renton, Tim (Mid-Sussex)


Buchanan-Smith, Alick
Hunt, John (Ravensbourne)
Rhodes James, R.


Buck, Antony
Hurd, Douglas
Ridley, Hon Nicholas


Budgen, Nick
Hutchison, Michael Clark
Ridsdale, Julian


Bulmer, Esmond
Irving Charles (Cheltenham)
Rifkind, Malcolm


Burden, F. A.
Jenkin, Rt Hon P. (Wanst'damp;W' df'd)
Roberts, Wyn (Conway)


Butler, Adam (Bosworth)
Jessel, Toby
Rossi, Hugh (Hornsey)


Carlisle, Mark
Johnson Smith, G. (E Grinstead)
Rost, Peter (SE Derbyshire)


Chalker, Mrs Lynda
Jones, Arthur (Daventry)
Royle, Sir Anthony


Channon, Paul
Joseph, Rt Hon Sir Keith
Sainsbury, Tim


Churchill, W. S.
Kaberry, Sir Donald
St. John-Stevas, Norman


Clark, Alan (Plymouth, Sutton)
Kellett-Bowman, Mrs Elaine
Scott, Nicholas


Clark, William (Croydon S)
Kershaw, Anthony
Shaw, Giles (Pudsey)


Clarke, Kenneth (Rushcliffe)
Kilfedder, James
Shelton, William (Streatham)


Clegg, Walter
Kimball, Marcus
Shersby, Michael


Cockroft, John
King, Evelyn (South Dorset)
Silvester, Fred


Cooke, Robert (Bristol W)
King, Tom (Bridgwater)
Sims, Roger


Cope, John
Kitson, Sir Timothy
Sinclair, Sir George


Cormack, Patrick
Knight, Mrs Jill
Skeet, T. H. H.


Costain, A. P.
Knox, David
Smith, Dudley (Warwick)


Critchley, Julian
Lamont, Norman
Smith, Timothy John (Ashfield)


Crouch, David
Langford-Holt, Sir John
Speed, Keith


Crowder, F. P.
Latham, Michael (Melton)
Spence, John


Davies, Rt Hon J. (Knutsford)
Lawrence, Ivan
Spicer, Michael (S Worcester)


Dean, Paul (N Somerset)
Lawson, Nigel
Sproat, Iain


Dodsworth Geoffrey
Lester, Jim (Beeston)
Stainton, Keith


Douglas-Hamilton, Lord James
Lewis, Kenneth (Rutland)
Stanbrook, Ivor


Drayson, Burnaby
Lloyd, Ian
Stanley, John


du Cann, Rt Hon Edward
Loveridge, John
Steen, Anthony (Wavertree)


Durant, Tony
Luce, Richard
Stewart, Ian (Hitchin)


Dykes, Hugh
McAdden, Sir Stephen
Stokes, John


Edwards, Nicholas (Pembroke)
McCrindle, Robert
Stradling Thomas, J.


Elliott, Sir William
Macfarlane, Neil
Tapsell, Peter


Emery, Peter
MacGregor, John
Taylor, R. (Croydon NW)


Eyre, Reginald
MacKay, Andrew (Stechford)
Taylor, Teddy (Cathcart)


Fairbairn, Nicholas
Macmillan, Rt Hon M. (Farnham)
Tebbit, Norman


Fairgrieve, Russell
McNair-Wilson, M. (Newbury)
Temple-Morris, Peter


Farr, John
McNair-Wilson, P. (New Forest)
Thatcher, Rt Hon Margaret


Fell, Anthony
Madel, David
Thomas, Rt Hon P. (Hendon S)


Finsberg, Geoffrey
Marshall, Michael (Arundel)
Townsend, Cyril D.


Fisher, Sir Nigel
Mates, Michael
Trotter, Neville


Fletcher, Alex (Edinburgh N)
Mather, Carol
van Straubenzee, W. R.


Fookes, Miss Janet
Maude, Angus
Vaughan, Dr Gerard


Forman, Nigel
Maudling, Rt Hon Reginald
Viggers, Peter


Fowler, Norman (Sutton C'f'd)
Mawby, Ray
Wakeham, John


Fox, Marcus
Maxwell-Hyslop, Robin
Walder, David (Clitheroe)


Fraser, Rt Hon H. (Stafford amp; St)
Mayhew, Patrick
Walker, Rt Hon P. (Worcester)


Fry, Peter
Meyer, Sir Anthony
Wall, Patrick


Galbraith, Hon T. G. D.
Miller, Hal (Bromsgrove)
Walters, Dennis


Gardiner, George (Reigate)
Miscampbell, Norman
Weatherill, Bernard


Gardner, Edward (S Fylde)
Mitchell, David (Basingstoke)
Wells, John


Gilmour, Rt Hon Ian (Chesham)
Monro, Hector
Whitelaw, Rt Hon William


Gilmour, Sit John (East Fife)
Montgomery, Fergus
Wiggin, Jerry


Glyn Dr Alan
Moore, John (Croydon C)
Winterton, Nicholas


Godber, Rt Hon Joseph
More, Jasper (Ludlow)
Wood, Rt Hon Richard


Goodhart, Philip
Morgan, Geraint
Young, Sir G. (Ealing, Acton)


Goodhew, Victor
Morgan-Giles, Rear-Admiral
Younger, Hon George


Gorst, John
Morris, Michael (Northampton S)



Gow, Ian (Eastbourne)
Morrison, Charles (Devizes)
TELLERS FOR THE NOES:


Gower, Sir Raymond (Barry)
Morrison, Hon Peter (Chester)
Mr. Spencer Le Marchant and


Grant, Anthony (Harrow C)
Mudd, David
Mr. Michael Roberts.


Gray, Hamish
Neave, Airey

Question accordingly agreed to.

Resolved,
That this House welcomes the start Her Majesty's Government has made in reducing levels of direct taxation; applauds Her Majesty's Government's success in controlling inflation and restoring financial stability; recognises the need to provide adequate public services; and notes that the present Conservative leadership is still wedded to old fashioned dogmas which in the past created so much squalor, social divisiveness and injustice.

Orders of the Day — BUSINESS OF THE HOUSE

Ordered,
That the Motion relating to Members' Secretaries and Research Assistants may be proceded with at this day's sitting, though opposed, until any hour.—[Mr. Bates.]

Orders of the Day — MEMBERS' SECRETARIES AND RESEARCH ASSISTANTS

Motion made, and Question proposed,

That this House agrees with the Select Committee on House of Commons (Services) in their recommendations in paragraphs 9, 17, 27, 31, 32, 33, 34, 36 and 38 of the Seventh Report of the said Committee in the last Session of Parliament (H.C. 508), and that the Fees Office be authorised, in respect of secretaries and research assistants employed on Parliamentary business whose names are registered with that Office by Members, to make monthly payments of salary on behalf of such Members, if so requested, together with appropriate deductions from their secretarial allowance.—[Mr. Bates.]

Mr. Deputy Speaker (Sir Myer Galpern): Mr. Speaker has selected the amendment in the name of the hon. Member for Nottingham, West (Mr. English).

10.27 p.m.

Mr. Phillip Whitehead: It is a great honour to open this debate. At the outset, I thank my right hon. Friend the Lord President for having given sympathetic consideration throughout to the Committee that I had the honour to chair and for providing time for the matter to be discussed.
We have been more fortunate in this respect than our predecessors who tried to deal with the question of proper facilities for the secretaries and research assistants who work for us, which, in effect, means providing better help to us in doing our job and is, therefore, a great advantage to Members. When I speak of our predecessors, I refer to those who three or four years ago produced the Select Committee's report, HC 375, the Committee under the chairmanship of the hon. Member for Wokingham (Mr. van Straubenzee). That report was never debated by the House. I pay tribute to the hon. Gentleman and his Committee for the work they did on that matter.
I also thank the Clerk to our Committee, Mr. Ryle, my colleagues who helped to produce our unanimous report and all those who gave oral and written evidence. I have time to single out only the Serjeant at Arms, the Deputy Serjeant at Arms, the Accountant and representatives of the Secretaries and Research Assistants Council.
We did not publish our evidence, for which hon. Members may be looking in vain in the report, partly because this is a sensitive area, as they will understand. The whole question of facilities and the back-up for Members of Parliament is comparatively new here. Anyone who reads that engaging book "Victorian Masterpieces" by the former Clerk of the House, Sir Barnett Cocks, will see that it was 1932 before the first typewriter appeared in this buildings. It was even later before the first typist was hired and secretaries were employed even by the staff.
Demands for more space, the second item in our report, the matter of office facilities and accommodation—were greeted with blank incredulity by many who were then in charge of the building. The then Serjeant at Arms, challenged on this point and asked to explain why he had in his house 40 rooms which were not used at all, said to an investigating Committee just before the war "Dammit, a fellow has to live somewhere." That approach to the proper use of the space within the Palace of Westminster has faded only slowly with the years. I am very glad that the present Serjeant at Arms and others in his Department have taken a more sympathetic view. I hope the House will agree that helping those who assist Members with their increasingly complex work is helping Members themselves.
Our Committee had a limited role. We cannot anticipate the future deliberations of the Boyle Committee, nor do we wish to intrude into the intensely personal relationship between a Member and those who work for him. We accept that there are 635 employers here, all different, with employees who differ in age, vocation and number from Member to Member. That is why in paragraph 9 we emphasise that we wanted the Member to remain the employer, with the right to hire and fire. In our experience, very few Members or secretaries who listened to the evidence that was given to the Committee want it otherwise.
Those who have stopped me in the corridors of this place and have asked jocularly "Have you managed to create the typing pool yet?" and made other quips of that kind are wide of the mark. The proposals that we have brought forward are entirely of a voluntary kind and


involve opting into the various schemes proposed. In no sense is there an element of compulsion. As is stated in paragraph 12, we accepted that
There can be no fool-proof system to ensure that all secretaries are treated in the best possible way. And no watertight scheme could be devised by the House for preventing any possibility of abuse of the secretarial allowance system. Essentially, the highest standards in both respects must remain a matter for each Member of the House.
We go on to say that each Member of the House has to account to the Inland Revenue for what he does with his own money and with the public moneys with which he is entrusted.
We have, therefore, turned to the question of how Members' secretaries and research assistants can all jointly be helped. Clearly, anyone who opted for the kind of assistance proposed in the scheme set out in the report would need to be known by name to the Fees Office We have said in paragraph 13 that
for the purposes of implementing the recommendations … it will be necessary for Members to register with the Fees Office the names and addresses of those secretaries and research assistants employed by them in respect of whose pay they draw their secretarial allowance. The other services and bnefits which Your Committee recommend … would also only be available to secretaries and assistants so registered.
We found a strong body of opinion wanting such payments to be made directly and centrally. That may be a point that my hon. Friend the Member for Nottingham, West (Mr. English) has in mind in his amendment. It was much more the line of the previous Select Committee. But the clear view of our Committee and the majority of the evidence given to it favoured the voluntary principle, which could be fitted in with and would not clash with the long-established Member-secretary relationships.
The heart of the report is the proposal in paragraph 15:
the the Fees Office should provide for Members an agency system on behalf of the House to assist them in the payment of their secretaries and research assistants.
The four proposals here which met with the Government's favour—a fifth did not—are, first, that
Any Member could nominate at the beginnining of each financial year one or two secretaries and not more than one research assistant to whom he wishes monthly payments to be made out of his secretarial allowances".

The second is that
he would have to state how much was to be paid each month to each nominated secretary etc.".
The third is that
the Fees Office would make monthly payments to the nominated person having deducted, and paid to the appropriate authority, income tax and the national insurance employee's contribution".
The fourth is that
the Fees Office would also deduct from the Member's secretarial allowance the national insurance employer's contribution".

Mr. David Watkins: There is a point which ought to be cleared up for the records of the House. There was originally a proposal in the report that there should be a 5 per cent. charge by the Fees Office, which if it were enforced would be quite excessive by commercial standards. Will my hon. Friend elucidate that point?

Mr. Whitehead: I take the force of that criticism. My hon. Friend leads me on to my next point, which is how I come to be putting forward the Government's motion as well as commending the report to the House.
As will be seen from the second part of the motion which appeared in the name of my right hon. Friend the Leader of the House, it is proposed by the Government that the recommendation for the agency fee should be set aside and that this should be borne as a charge upon the House. The original proposal, as set out in the report in paragraphs 15 to 19, was, as my hon. Friend says, that the service should be offered for a 5 per cent. fee.
The recommendation in paragraph 17 that guidance on current rates of secretarial pay should be provided by the Fees Office—rather than any attempt at grading what are, and will remain, a multiplicity of different responsibilities and hours worked—is accepted by the Government.
But the change that is proposed in my right hon. Friend's motion goes further than the Committee went. As hon. Members will see, the Committee in paragraph 19 left open the matter as between an agency fee chargeable against the allowance or on the House Vote. The question that was in some minds, including the minds of those who gave evidence to the Committee, was whether such a scheme could be carried on the House


Vote, bearing in mind things like current pay policy guidelines and an element of subsidy with regard to other services which some hon. Members use and others do not. There are a great many such services from the car park upwards.
I understand that the Department of Employment has advised that, under the pay policy guidelines, the cost of any improvement in the terms and conditions of a job must be taken into account in assessing the total level of settlement, save for improvements in occupational pension schemes and improvements which have been allowed additionally under the policy applying before 1st August 1977. That would rate as an improvement in terms and conditions under the policy if it involved significant extra cost, since it will relieve Members of an identifiable amount of work.
It is understood, however, that the Accountant does not propose to recruit any further staff to carry out this scheme until it is clear how many Members will make use of it. It may well be that even when the scheme is fully operational the additional costs will be marginal. They will certainly be far less than 5 per cent., as my hon. Friend the Member for Consett (Mr. Watkins) said.

Mr. Michael English: At some point, will my hon. Friend explain what the scheme does for the secretaries?

Mr. Whitehead: It provides for the first time for those whose employer Members have opted in a guaranteed payment on a guaranteed basis. I have quite deliberately not gone into some of the evidence presented to the Committee with regard to hardship and exploitation.
Often these things come to one as hearsay. It is hard to get concrete evidence about what has happened. But the fact is that secretaries who are covered by the scheme would he guaranteed an income and would, therefore, have a relationship with the Member out of which some of the present embarrassments are drawn. I think that that is a major advantage for them.
We accept that not all Members will join the scheme, for a variety of reasons. As I have said, there is absolutely no element of compulsion about it.

Mr. Tim Sainsbury: I think that the hon. Member is coming to paragraph 20. Does he envisage that Members can opt in for part of their allowance and opt out for the rest, or does it have to be all in or all out?

Mr. Whitehead: It is made perfectly clear in the report that the amounts paid and to whom they are paid are left at the discretion of the Members. A Member can actually nominate one or more people for a part, the whole or a shared allocation in different ways. These different ways could, of course, in the case of some Members with particular requirements in the employment area, lead to a variable payment at different times of the year. But the position would, of course, be agreed, with the Fees Office, with which the particular secretaries and research assistants would be registered.

Mr. Terence Higgins: I have some difficulty in believing what the hon. Member appears to be saying. Are we to understand that the effect of the scheme in terms of cost to the Government would actually mean an increase of 5 per cent.? If so, there must be better ways of spending 5 per cent. on secretaries' salaries.

Mr. Whitehead: My view—other members of the Committee are here and will be able to speak for themselves—is that what the Government have proposed is an improvement on the Committee's report. That is why I am happy to commend it to the House.
I said that a number of hon. Members probably would feel that they already had efficient ways of paying their secretaries themselves and were dealing with this externally and did not wish to get involved with the House. We hope that that will continue, and we have no proposals which impinge upon that right, which they would retain.

Mr. Andrew Faulds: If I understand my hon. Friend aright, this means that hon. Members can, if they wish, stay out of the scheme completely—I accept that that is a beneficial aspect of it—but that they are still entitled to draw in toto their secretarial allowances, so that under this scheme the elements of abuse which have undoubtedly existed in the past will go on. Is that right?

Mr. Whitehead: I cannot be led into any suggestion that an hon. Member who draws his allowance without being a party to the scheme is necessarily more likely to be guilty of abuse. It is not part of our thinking that that would be the case.
All 635 hon. Members, I understand from the Accountant, draw either wholly or in part the secretarial allowance. The fact is that only about half that number have secretaries even registered in the building. Many have secretaries elsewhere in other parts of the country, and it could be that many such hon. Members would feel, at least initially, that they saw no advantage in opting in. I do not think it can be said to follow from that that they could be said to be abusing the scheme. I hope that as many hon. Members as possible opt in and that, as the advantages of the scheme become apparent both to them and to their secretaries, that will increasingly be the pattern.

Mr. Victor Goodhew: Is not it a fact that hon. Members are required to declare to the Inland Revenue the amounts which they pay to their secretaries and then to declare, below the line, the amount they draw from the Fees Office in respect of the sum which they pay to their secretaries? Therefore, I hope that there is no question of there being any possibility of difficulty about being thoroughly straightforward about the way in which hon. Members claim for their secretarial allowance.

Mr. Whitehead: I think that that illustrates the disadvantage of giving way when one is trying to develop a case and when so many other hon. Members wish to speak. The hon. Member for St. Albans (Mr. Goodhew) should read paragraph 12 of the report, which makes it clear that there is that check by the Revenue for all hon. Members. If the hon. Member reads Hansard, he will see that I said that earlier in my remarks.
I turn now to the question of severance indemnity, because here I part company with my right hon. Friend the Lord President and his motion. The Committee felt very strongly that there should be some form of severance payment. Cases of real hardship were brought to our attention, and there have been some in the recent past.
The more modest dilemma of secretaries was well stated by one who gave evidence to the Committee. I shall quote from her letter:
One point put too often to be ignored is that of the secretary to a particularly hardworking Member whom she considers to be a candidate for a heart attack. She is well aware that the secretarial allowance ends with the death of a Member and is valiantly trying to put something away 'for a rainy day', as she knows she will want to help the Member's family in any way she can and will not want to bother them about her salary. She typifies the best kind of secretary to be found in the House and I know her Member values her greatly, but I wonder where else this kind of situation could arise, and whether it is necessary that it should.
The Committee proposed—we should acknowledge the special position of secretaries in this place—that there should be a severance payment. We are talking about a question of sudden death, after all—electorally, at least—and, in the fourth year of a Parliament, one does not need to remind hon. Members of how quickly some of our number are snatched from us by mortality.
Overnight, a secretary ceases to have any claim on public funds. She is not employed by an hon. Member. Yet, ironically, her work here could go on for weeks or months simply settling up that hon. Member's affairs. How can we agree severance pay for ourselves—as we did in Parliament not so long ago, because it is said, quite rightly, that we are at risk—and not extend it to our employees?
The Committee recommended that there could be no question of continuing payment because the precise conditions in which payment is made vary according to each employer for each and every one of us, so we therefore suggested the payment of a lump sum as severance indemnity equivalent to about three months' average secretarial salary.
My right hon. Friend has explained to me why the Government will not go along with this proposal in its present form. He suggests that it is not clear from the report whether our Commmittee was aware that secretaries are already entitled to benefit under the Redundancy Payments Act, under which a secretary can claim on the Member or his estate, and a proportion of that, 41 per cent., can be reclaimable from the Redundancy Fund.
However, in his letter to me, my right hon. Friend acknowledged that there are categories excluded from that legislation


and even from going through the very disagreeable procedure of suing or bringing a claim upon the widow of the Member concerned. These categories include women over the age of 60, men over 65, those married to their employer—there are many women here who are the wives of Members, and very distinguished secretaries some of those are, too—and those with less than the necessary qualifying service of two years at not less than 16 hours a week.
It is said that Members are not employees and that that is why they can have this form of severance pay, and that secretaries are entitled to redundancy pay. I want to hear from my right hon. Friend, when he speaks at the end of the debate, how this squares with the position of many secretaries who, for tax purposes, have been able to establish themselves and successfully to maintain themselves as self-employed, precisely as Members in the past have been self-employed. I hope that my right hon. Friend will address himself to this matter at the outset, because I think that it causes disquiet on both sides of the House that we cannot go ahead tonight with some acceptable form of severance payment, because by doing so we should end a palpable injustice.
If the House tonight eliminates the 5 per cent. charge to Members opting in, and only their secretaries will be eligible, in any event, for what we propose, perhaps it will consider a levy of some kind to cover severance payment in the circumstances envisaged. The only alternative to that is to return to the proposal in the report, which is that this should be chargeable on the House Vote.
I turn very briefly to the question of pensions. Our predecessors recommended that there should be a pension scheme for those who were centrally paid. According to their proposal, that would have been linked automatically to the rather less flexible payment scheme. We found overwhelming support for this idea, and the evidence made clear what a wide variety of employment experience there is here and for how long a person can work here full-time with absolutely no pension entitlement whatsoever.
Therefore, we said in paragraph 27 of the report that the Fees Office should prepare a scheme for the provision of

pensions to Members' secretaries. The Fees Office has been extremely helpful about this. It has made inquiries and received quotations from insurance brokers, and it appears that we can devise a plan under which the Fees Office would make regular additions to a secretary's salary which would then be deducted to make payments into a life assurance scheme which would produce a regular pension plus a tax-free sum at retirement.
The Accountant has very kindly sent me in the last few days details of alternative schemes which have been produced by various companies and which have been looked at by the Government Actuary, all of which produce, for differing initial sums invested, various pensions after five years of service for the secretaries of Members. I am glad to see that the Government support that, and I very much commend it to the House.
Finally, I want to spend a couple of minutes on the question of facilities at Westminster, with particular reference to Norman Shaw North and Norman Shaw South, where the secretaries and research assistants are now being congregated. There has been criticism of the excessive crowding of Norman Shaw North and of the great difficulties of research assistants who work there. As hon. Members will see, we have proposed in the report that everything possible should be done to provide good working facilities for research assistants, who should be assumed to be working full-time or most of the time for Members of Parliament. That is not to say that we want to keep open house for anyone who wants to come in and be a fake research assistant with an MP purely as a facade. Many genuine assistants are working in cramped and difficult conditions.
The Committee also recommend that the principal Library and reference facilities for the use of research assistants and secretaries should be those provided in the Norman Shaw North branch of the House of Commons Library. The Librarian has taken a number of steps to see that the facilities are increased.
There is a point about the stationery allowance. The secretarial allowance that hon. Members are paid has to cover a multitude of purposes, not only the salaries of secretaries and research assistants. It also covers the replenishment of


typewriters and a host of other things that in almost any other legislature in the world would be provided by the central agency for which Members work.
It was not within our remit to offer more than helpful advice and counsel to the Boyle Committee, but when that Committee next examines this it should consider the possibility of a separate means of covering these office expenses. It is nonsense that the secretarial allowance should cover so many office expenses that have nothing whatever to do with the remuneration of the staff. If this is not done quickly, it means that consideration will have to be given to enlarging the scope of office requisites supplied free to Members.
We make certain proposals for other concessions such as easing access for secretaries to the Post Office and the State opening of Parliament. I hope that there will be no objection to that.
The report ends by saying that if we are to provide decent facilities here commensurate with the responsibility involved, the present level of secretarial allowance should be reviewed urgently by the Boyle Committee. All the things that we want to do cannot be done on the present allowance.
We have in Westminster a host of dedicated people working unsocial hours in cramped conditions to keep Members going and Parliament running. For some this service is recognised in salary, status and security, but for others it is not. I hope that the report makes a modest beginning at putting this right. For that reason, I commend the motion to the House.

10.53 p.m.

Mr. Cyril Smith: I regret that I cannot share the enthusiasm of the Chairman of the Committee, the hon. Member for Derby, North (Mr. Whitehead), for the Government's reaction to the report. The Government have given support to all the paragraphs and recommendations which do not mean very much and have virtually ignored all those that would take us forward.
If one studies the paragraphs which have Government support, one sees that they do not really mean much. For example, the Government support paragraph 17, which says that the Fees Office

will give us advice. That is very good of it—I am sure we are all very grateful. Paragraph 27 says that a scheme will be prepared for pensions. We all know what happens to things when they are being "prepared". I should like to see the Government go much further in providing pensions. There is no mention of actually doing something, as opposed to talking about doing something.
I attended every meeting of the Committee, and I challenged the Accountant on the provision of pensions. I said that in my local government experience it was possible for people not employed by a local authority to opt into its pension scheme. I produced evidence from the clerk of my local authority to prove that this was so. If it is possible in local government, why is it not possible in national Government? If a Member of Parliament employs a secretary, he cannot opt for that secretary to enter some Civil Service scheme without becoming a civil servant. I tried to push that matter in Committee. Therefore, I hope that when the time comes to make a recommendation on that topic the matter will not be overlooked.

Mr. George Cunningham: In view of the differing situation which applies to Members' secretaries, does not the hon. Gentleman think that it would be more in their interests to take a deferred annuity paid by the Member, or paid partially by the Member and partially by the secretary, the benefits of which would be ensured for them for ever and in relation to which nothing would be lost if they were to move to other employment? Is it not better to have that arrangement rather than that the secretary should be a member of a pension scheme in which full transferability might not apply when she moved to some other job?

Mr. Smith: I am grateful for that intervention. That point is worth considering. I am suggesting that something should be done about pensions, and nothing has been done in the report or in the motion that is before the House. Therefore, I hope that somebody will consider taking action. The hon. Gentleman's point, among others, can be considered, but I wish to ensure that none of these matters is overlooked.

Mr. English: I am sure that hon. Gentlemen will accept that, if my amendment is accepted, the wishes of the House will be clear in this respect.

Mr. Smith: I accept what the hon. Gentleman says, and I hope that his amendment will be carried.
Let us examine some of the other paragraphs in the report. Paragraph 31, which the Government accept, says that
everything possible should be done to provide good working facilities for … research assistants".
Well, that is very useful—but that is all. Paragraph 32 says that certain Library facilities should be available, and one could go on quoting similar features. I must mention also the provision of tickets to allow secretaries to stand on the pavement at certain State functions—that is to say, if nobody else wants to occupy the space at the time. It is all good stuff and useful, but it will not give a great deal of assistance to secretaries.
As a member of the Committee, I also tried to push the case for giving Members' secretaries some direct help. But all that is being done in the motion is to say to Members "If you wish, you may ask the Fees Office to pay your secretary instead of paying her yourself, and whatever we pay her will come out of your allowance of £3,500." That proposal would save me about 10 minutes a month which is now spent in working out the tax and writing out the cheque.
If all Members were required to opt into the scheme, there might be a different argument to be deployed because Members' secretaries would benefit. However, the odds are that the Members who would opt into the scheme would be those against whom secretaries have no complaints at present anyway. I assure the House that some of the stories we heard in Committee gave the impression that there are Members of Parliament whose dealings with their secretaries in financial matters leave much to be desired.

Mr. Nigel Spearing: Has not the hon. Gentleman forgotten one point? If what he says is correct, it would give an opportunity to a Member's secretary to say "Yes, I shall be your secretary as long as you opt into the scheme."

Mr. Smith: I accept that. That is why I am happy to go along this road. It is better than going along no road at all, but the sections of the report that the Government have accepted do not take us very far.
The one part of the report that would have taken us some way is the section dealing with severance pay, but the Government have not accepted that. I was enthusiastic about the proposed register because, in the event of a secretary becoming unemployed at short notice through the defeat or death of an hon. Member, the Fees Office would know whom to pay and so on. But the reason for the register is destroyed by the fact that the Government are not prepared to accept the proposals on severance pay. I support the plea to the Leader of the House to explain why the Government are not prepared to do something about this part of the report.
We heard some graphic stories about what happens on the death of a Member. The secretary of one Member was telephoned within 24 hours of his death and asked whether he died before or after midnight, secretaries have been turned out of offices within a few hours, the Serjeant at Arms has parcelled up various items and taken them to the hon. Member's relatives, secretaries have been refused access to the building and so on.
A secretary has an extremely difficult task when an hon. Member dies. Added to all her other problems, she is faced with trying to get wages from the Member's widow. As I am a bachelor, I suppose that my secretary would have to find out who were the executors of my estate and try to get the money from them. It is not on.
Acceptance of the recommendation on severance pay—£500 was decided because it represents about three months' salary—is the most vital step we could take, together with the provision of some sort of pension rights.
I welcome the fact that the Government are prepared to allow hon. Members to have their secretaries paid by the Fees Office and that no charge will be made for that service. That is a good thing, though it is only in line with what the Committee pressed for and what the Services Committee proposed in its amendment to the report.
I questioned the Accountant closely and challenged his proposal for a 5 per cent. charge. I was staggered when he said that he would need four extra staff to work out the wages. If half the Members of the House opted into the scheme, that would total 300 wages a month or 75 a week. The Accountant said that he would require four full-time staff to work out 75 wages a week. I told him that he would not last five minutes in my business or in anyone else's. How on earth he arrived at 5 per cent. as the appropriate charge is beyond my understanding. I am delighted that the Government have agreed to pay the charge, but I hope that they are not taken for a ride and will not accept anything like 5 per cent. as being reasonable.
I shall vote for the amendment and for the motion because it is better than nothing. The conditions of employment of our secretaries leave a great deal to be desired, and neither the report nor the recommendations that we are being asked to accept are anything like enough to meet the requirements of giving our secretaries a fair deal and a square deal which, I believe, is the desire of all hon. Members.
All we are doing is nibbling at the problem. The sooner we take a bite at it, the better.

11.5 p.m.

Mr. Michael English: As the hon. Member for Rochdale (Mr. Smith) said, we have co-operated for many years. I am glad that we are co-operating on this issue.
There were two Committees involved. The Committee chaired by the hon. Member for Wokingham (Mr. van Straubenzee) had a simple proposition to put forward. Again, it was an option. It was the option that a Member could, if he wished, go to Mr. Wilkin, the Accountant in the Fees Office, and say "Will you please put my secretary on Civil Service pay and conditions?" That is a simple suggestion. Incidentally, it does something for both the secretary and the Member. It was only comparatively recently that we were given a secretarial allowance. When it started it was £500—which would not provide much of a secretary—but it has grown. As it has grown, there are occasional Members who misuse it. It would be much

better if we provided a way in which all Members who wished to do so could put their secretaries on to Civil Service pay and conditions.
There is a further difference between the Committee chaired by the hon. Member for Wokingham and the Services Committee chaired by my right hon. Friend the Lord President. My right hon. Friend is almost developing a style which means that if ever a Select Committee was set up by his predecessor to deal with a certain issue, and if ever it produced recommendations—for example, on broadcasting or secretaries—my right hon. Friend sets up another Select Committee to alter the previous recommendations. I suggest to my right hon. Friend that we stick to the Select Committee reports that we have.
It is only because of my amendment that the report of the Committee of the hon. Member for Wokingham comes before the House. The suggestion of my right hon. Friend and the Services Committee is not nearly as good. It adduced only argument, it produced no evidence. My hon. Friend the Member for Derby, North (Mr. Whitehead) has said that it did not produce the evidence because there was some evidence that it did not want to publish. Therefore, it did not publish any of the evidence. However, the hon. Member for Rochdale has quoted some of the evidence and it is possible to print it. The first Select Committee to deal with the issue had some difficulty. I gave evidence and gave examples. I asked the Committee to omit them from the published evidence, which was duly done. However, that does not mean that the Services Committee had to suppress all the evidence.
I do not want the Services Committee to give us the evidence of the detailed activities of individual Members with their secretaries, but I should like the Treasury's evidence. What did the Treasury tell the Committee?
What sort of statement do we find in the latest report? Let us take pensions as a case in point. Paragraph 25 states:
Your Committee emphasise that such provision"—
for pensions—
could not be made by the House, nor could the House make any form of employer's contribution to such a scheme as the secretaries are not employed by the House.


Why is it that we cannot do what is done throughout the Congress of the United States? Why is it that if a Member can hire or fire his secretary she cannot be incorporated as part of the Civil Service pension scheme? There is no reason why we cannot do it except that the Treasury does not want to do it.
There has been much criticism of the Civil Service pension scheme under the 1971 Act, and it seems that the Treasury does not want to put anyone else into the scheme.

Mr. Nicholas Winterton: Nor do we.

Mr. English: That may be quite right. I did not advocate that in the report of another Committee that I chaired, but it may be that there is an argument for changing the scheme. It may be said that it is over-generous, but that is no reason for leaving our secretaries who regularly work for hon. Members. If we are to change the scheme, let us change it for everybody, but let us not preserve it for the 750,000 who work for the Civil Service and say that the secretaries who work for 635 Members should be left out.
What alternative is proposed? It is remarkably generous. It does not save the taxpayer any money. The alternative proposed is that premiums of between 10 and 15 per cent. of the secretary's salary could be paid under this scheme run by a private insurance broker. It is not a scheme that has been set up, as the hon. Member for Rochdale pointed out. It is a suggestion thrown out that, if one wished to pay between 10 and 15 per cent. extra, if the Boyle Committee agreed to give Members 10 per cent. to 15 per cent. extra and if the scheme were created in future, secretaries could be paid a pension.
One or two secretaries will have retired long before that pension scheme comes into existence. It would not apply to anybody who was in the job for less than five years. If they were Civil Service secretaries—for example, secretaries of Officers of the House, the Serjeant at Arms or the Clerk—they would be in the pension scheme. Why not if they work for Members?

Mr. Nicholas Winterton: We always come off second best.

Mr. English: As the hon. Member for Rochdale said, none of us wishes to oppose my right hon. Friend the Leader of the House or my hon. Friend the Member for Derby, North. I have carefully worded my amendment so that, whether it is lost or carried, it makes no difference to my hon. Friend's motion. Indeed, his motion is perfectly harmless. It is not worth arguing against. I have no particular reason for arguing against it. But, as the hon. Member for Rochdale said, it goes a little step on the way. If Members or the staff of the House do not wish to do so, it allows secretaries to stand on the pavement outside the House at the time of the State Opening of Parliament. It is a disgrace. But it is a small step that, by a resolution of the House, secretaries of Members should be acknowledged to exist.
Meanwhile, the object of my amendment is to implement the first of the Select Committee reports. It is, no doubt, not perfect. No doubt there will be details that the Services Committee would need to tidy up. I do not dispute that. But the principle is clear in the report of the Committee chaired by the hon. Member for Wokingham.
Several hon. Members have asked me what the hon. Member proposed, so I should quote the Committee's words:
we propose that Members should be given the option either of continuing to claim for a secretarial allowance or alternatively of electing to ask the House to undertake the direct payment of salaries to secretaries nominated by Members.
After saying that the
proposal is designed to preserve that flexibility which has characterised the arrangements for employing Members' secretaries at Westminster",
the Committee—this is the difference—goes on to relate the salary payable to secretaries' salaries in the Civil Service.
In paragraph 10, the Select Committee pointed out that in 1974–75, at the time of that report,
A personal secretary, working for an assistant secretary in the civil service, earns in Inner London something in the region of £2,400 to £3,100 plus proficiency payments which can amount to a further £300 or so.
That was in 1974–75. It has, of course, increased since, though not as much as one might expect, because the Civil Service, like others, has been subject to the


pay policy. But that would make it possible, without arguing about the level of secretarial allowances, for Members to say "Please pay my secretary like an ordinary secretary in the Civil Service". We are suggesting not that a secretary should be paid the same as a first-class, high-powered secretary—the Prime Minister's secretary or someone of that ilk—but that she should be paid the same as an ordinary secretary working for an ordinary basic rank civil servant in the House of Commons.

Mr. Faulds: Would my hon. Friend accept that some of us would much resent that reflection on our secretaries?

Mr. English: I sincerely hope that hon. Members who feel that their secretaries are worth more will take the appropriate action and pay them more, as, I have no doubt, some Members do. [AN HON. MEMBER: "With what?"] One of the details that we could argue about is at what level secretaries should be paid. The point is that no one would suggest that secretaries should be paid less. The suppressed evidence of this Select Committee, just as the suppressed evidence of the previous Select Committee, made it clear that some people are being paid ridiculously, miniscule amounts. There are elderly women in their seventies working for pin money—no doubt because for some reason or other they have not got pensions. We do not need to go into these details since many hon. Members know of them.

Mr. Michael Latham: Can the hon. Member answer one simple question, because I have some sympathy with his amendment? Let us suppose that we carry the amendment. Would the whole matter be thrown back into the melting pot? The advantage of the motion is that we can then get on with it.

Mr. English: My amendment does nothing but add to the motion. It in no way detracts from any part of it. My right hon. Friend the Leader of the House must answer for himself. It is not for me to answer for him. I am talking of the words on the Order Paper, and they are perfectly clear. My amendment adds an extra provision, to approve the first Select Committee's report. I suggest that we do that. The motion is good but purely cosmetic. It does nothing for the

secretaries. We should be doing something for them. It should be possible to put them on Civil Service salaries pensions and conditions generally.
I beg formally to move, at the end of the Question to add
but considers that provision for payment of secretaries should also be made, in respect of Members who so decide, in accordance with the proposals of the Select Committee on Assistance to Private Members in their First Report in Session 1974–75 (H.C. 375).

11.17 p.m.

Mr. William Clark: I do not wish to enter the argument about whether secretaries should be on the Civil Service payroll. That is premature until the salaries of hon. Members are linked somehow to Civil Service grades.
I congratulate the Committee on its recommendations. I beg the Leader of the House to heed the argument in paragraph 24 of the report, if for no other reason than that he is the champion of the rights of people who work for other people. If workers lose their jobs and wages, they are entitled to redundancy pay. It is all very well for the Leader of the House to say that secretaries are covered by redundancy pay—that is fair enough—but an employer of a secretary has to pay 45 or 55 per cent. of that redundancy payment and the Government pay the rest out of the Redundancy Fund.
I appeal to the Leader of the House to accept that a Member of Parliament who gets an allowance for a secretary makes his own peace with the Inland Revenue. If he employs a part-time secretary he is entitled to claim only what he pays his secretary. I should not have thought that there is much abuse. If there is, that is a matter for the Inland Revenue. We can rule that out of the argument.
If for any reason someone ceases to be a Member of Parliament—because he does not stand at the next General Election or because he dies—his salary and allowances stop immediately. But his legal liability to his secretary remains under the redundancy legislation.
The Select Committee has suggested 25 per cent., which amounts to about £900. I do not argue with that. In most cases that would defray the legal liability of the Member employer, who could apply to the Redundancy Fund for the rest. I am disappointed that the Leader of the House threw out that suggestion.
I can understand the right hon. Gentleman's rejection of suggestions involving Civil Service grades, but I cannot understand his attitude towards redundancy. All the nonsense about not knowing who the secretary is is immaterial. The liability of a Member of Parliament here is that he serves here and needs a secretary, and that has been accepted by successive Governments. As the hon. Member for Nottingham, West (Mr. English) said, it started with a sum of £500. It was thought by some that a Member should pay for his secretary out of his own salary, but the sum went up to £1,500 and then to £2,000, and it now stands at £3,500.
Successive Governments have accepted the responsibility of Members of Parliament to employ secretaries. The Leader of the House should go one step further and, with his normal championship of workers in all spheres of the economic spectrum, accept paragraph 24 to provide some severance pay so that a Member of Parliament or his widow would have sufficient money to defray his responsibility to his Secretary.

11.21 p.m.

Dr. Jeremy Bray: Every hon. Member who has spoken has strongly supported paragraph 24 in one form or another. We are in the second half of this Parliament, and we do not always find it easy to give time to the consideration of the affairs of our secretaries and research assistants. I am sure that no hon. Member wishes this Parliament to come to an end without our having dealt with the question of redundancy payments. I wonder, therefore, whether you will accept a manuscript amendment, Mr. Deputy Speaker, to include paragraph 24 in the motion and thus enable the House to deal with it.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): I can tell the hon. Member at once that that would not be acceptable.

Dr. Bray: Then I must ask my right hon. Friend the Leader of the House for a categoric assurance that this question will be dealt with in this Session of Parliament in time to have effect at the next General Election.

11.22 p.m.

Mr. Nicholas Fairbairn: Many of us take the

view that the relationship between ourselves and our secretaries should subsist. Let us not forget that redundancy payments and the payment of pensions are costs that we shall pass on to our constituents. It is important that when, on the many occasions that we must, we regard ourselves as electing our own salary, our own method of subsistence and our own services, we remember that we have a public duty. It is to bear in mind that this all represents a cost to our constituents.
I would not accept for a moment that Members of Parliament in this country should have lesser services than are available to Members of Parliaments of other countries, but we must consider, in giving ourselves services, that we shall be passing on the costs to those we represent.
I represent one thousandth of the people of this country, and the costs that I pass on to them matter to me a great deal. It matters to me equally whether my secretary is properly looked after. It matters to me equally whether Members of Parliament are properly rewarded for their services. These are important matters.
We often fear to ask ourselves whether it is right that we should have a salary or an increase in salary and whether our secretaries should have a salary or an increase in salary. Let us not allow our secretaries' reward to be merely a Civil Service reward. Each of us employs his or her secretary. Let us ensure that the contract of employment is in accordance with all the best principles of employment and that the Fees Office does not ensure in some dull and absurd concept that our secretaries and we ourselves are mere civil servants.

11.25 p.m.

Mr. Eric S. Heffer: I think that the hon. Member for Kinross and West Perthshire (Mr. Fairbairn) is living in a totally different century from the rest of us. I could not understand what he was talking about.
When I first became a Member we received absolutely no allowances for secretaries. My wife is my secretary; everybody knows that. She gave up her job in the Civil Service to work for me for nothing for two years. She has made quite a contribution to the people of this


country in that way. The whole matter is scandalous. I was not in a position to pay her. We have made some advance since then, when the position of hon. Members was nonsense, but it is still not good enough.
I entirely agree with the hon. Member for Rochdale (Mr. Smith). We certainly should appoint our secretaries and negotiate the hours they work. Some need to be here until 8 o'clock or 9 o'clock at night and so on, so they cannot have strict Civil Service hours, from 9 to 5.
What is wrong is that our secretaries end up with no redundancy payments in the event of the employing Member losing his seat or dying, nor do they receive pensions. It is ridiculous.
What employer, what director or manager of a company, employs his own secretary and provides his own typewriter, typewriter ribbons, pencils and notebooks? The whole business is archaic. We are not living in this century.
I entirely agree with my hon. Friend the Member for Nottingham, West (Mr. English) and I shall vote for his amendment, which is sensible.
I ask my right hon. Friend the Leader of the House to look at paragraph 24 again. We must find a way round the problem. I admit that there are difficulties—of course there are—but we agreed that we should have redundancy payments in the event of our being made redundant by the people. That is correct, because everybody else receives redundancy payments when sacked. It is right that Members of Parliament should also receive them, but for our secretaries not to have them is absolute nonsense. I ask my right hon. Friend to give further consideration to the matter.

11.30 p.m.

Mr. Terence Higgins: I want to make three points, and to make them briefly. I believe that there is widespread dissatisfaction in the House about the way in which we handle matters which concern Members' pay and secretaries' salaries. Much of the problem arises because often we can take a decision which involves public expenditure only on the initiative of the Government. We should consider whether it is right that that restriction, which applies to all other

governmental matters, should apply to the House of Commons itself.
Be that as it may, I think that there is an obligation on the Leader of the House, when the House expresses a view as clearly as it has done this evening that a decision ought to be taken on paragraph 24, to table an amendment and we should then be allowed to debate it and vote upon it. The right hon. Gentleman is failing in his duty as Leader of the House if that is not done.
Secondly, I find it extraordinary that the idea that some salaries of secretaries should be paid centrally might incur a cost of, say 5 per cent. to public funds. If it is anywhere near that, we ought to look into the matter. At all events, it seems a misuse of the available resources, and I feel that there are better uses to which those resources could be put in facilitating the work that we do on behalf of our constituents.
My third point is about the provision of pensions, and it arises in paragraph 26 which is related to the recommendation in paragraph 27, which is mentioned in the motion. Paragraph 26 says in relation to pension contributions for secretaries that such contributions, which
would have to come out of the relevant Member's secretarial allowance would, of course, qualify for tax relief.
I view that with some concern, because many of us pay our secretaries the maximum allowable—indeed, many of us pay substantially more—for carrying out our parliamentary duties. It follows, therefore, that if the allowance for the contribution to the pension is to come in the way that is suggested it will inevitably have to come either from a reduction in our secretaries' own salaries, which is absurd, or from a reduction in our salaries. That does not seem to be a satisfactory arrangement.
One might think that one could rely on the Leader of the House to do something about that, but secretaries already have a pension under the national insurance scheme. Recently, the employers' contribution went up. I say recently, but it was way back before last July. Although I have made representations to the Leader of the House, he has refused to accept that that ought to be covered out of the secretary's salary. In my view, he has totally confused the pay restraints on


secretaries' salaries and the pay restraints on Members' salaries.
Because the right hon. Gentleman has not done anything about that, in order to cover the employer's contribution for the secretary's national insurance arrangements Members have had to take a cut in their money incomes—not just real incomes, but money incomes. The right hon. Gentleman replied to me in a letter—I have told him that I would quote from it—dated 31st January, in which he said:
I have considerable sympathy with your argument"—
which is not of enormous help, I must say. He went on to say that he thought
it was right in 1976 and 1977 to recommend increases to the House which were clearly related to the standard pay rise limits at that time".
That is absolute gibberish. The right hon. Gentleman added that he did not think he could do anything about it at the moment but
I have made arrangements accordingly to ensure that it will not be overlooked
at some unspecified time in the future.
If that is so in the case of national insurance contributions, I view with even more concern the proposals that are made in paragraph 26. I think that the Leader of the House is failing in his duty in this respect, and if things go on like this we shall have to consider seriously whether our procedures should be modified in the way that I have suggested.

11.34 p.m.

Mr. Tim Sainsbury: I support what has been said by the hon. Members who have spoken in favour of paragraph 24. I think that the matters referred to therein need urgent attention.
I am, in general, in favour of what has been said about helping the pay of our secretaries. The only doubt that I have about the amendment in the name of the hon. Member for Nottingham, West (Mr. English) is whether we would find secretaries' salaries being linked into the wrong—and by that I mean too low—level of Civil Service salaries. The figures given by the hon. Gentleman were not the ones relating to a deputy secretary, which I would have thought would be more appropriate bearing in mind the complexity and volume of the work with which we have to deal.

Mr. English: I said that there were details that would have to be tidied up by the Services Committee. Tonight we have an opportunity to make the will of the House plain, and that sort of detail, whether it is an assistant secretary's salary or a deputy secretary's salary, can be left until we have discussed and dealt with the principle.

Mr. Sainsbury: I am grateful to the hon. Gentleman for that intervention, but I am still nervous about the pressure that might be exerted from the Treasury, or elsewhere, to keep it too low, because that would be unjustified. In the same way as our job becomes ever more complex, so does that of our secretaries.
One aspect of the reward of our secretaries that has not been referred to is overtime and how that would be dealt with under the arrangements that have been referred to.
I should like, Mr. Deputy Secretary—I apologise, Mr. Deputy Speaker; there are too many secretaries around this evening. I should like to direct my remarks to paragraph 31, because we have not really referred to the other aspect of the working conditions of our secretaries and research assistants, which is the manner in which they are named. Paragraph 31 says that
everything possible should be done to provide good working facilities.
Some facilities are totally inadequate, and one would hope that everything possible was being done. If what is being done and has been done is regarded as satisfactory, I am positively staggered.
I know that hon Members present are aware of the ever-increasing complexity and volume of constituency correspondence, and the complications of constituency cases and the increased amount of work of Select Committees. The Leader of the House may not be as keen on increasing the scope of Select Committees as some of us are, but whether that be so or not we know that there has been a considerable increase—I for one welcome it—in their work. This has thrown additional work on secretaries and research assistants.
The hon. Member for Denby, North (Mr. Whitehead) referred to matters becoming increasingly complex. That is an understatement.

Mr. Fairbairn: It is a fantasy to imagine that this House becomes more and more complicated. The issues are the same. We do not need research assistants. It is a fantasy to imagine that we Members are all more important than Members used to be.

Mr. Sainsbury: On this occasion I totally disagree with my hon. and learned Friend.

Mr. Faulds: If this scheme were to be introduced, would it not allow the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) to appoint an additional dresser?

Mr. Sainsbury: Further to that point; there would be no room for my hon. and learned Friend to be accommodated. He would not be allowed a desk or a chair.
There is one point that the hon. Member for Denby, North has not appreciated—the change in the level of expectation of Members. It has been said that not long ago there were no such things as secretaries in the House, but we are now not long away from the situation in which virtually every hon. Member will need and will have a full-time secretary. I hope that many more Members will have at least part-time research assistants.
Appendix 2 of the Select Committee's report shows that there are 295 secretarial desks in the House. I should have thought that if we cannot provide 500—assuming that about 100 are accommodated elsewhere—we are not meeting the need that will shortly arise. I should have thought that in addition there should be between 200 and 250 research assistants' desks.
We should be ashamed of the manner in which the desks are housed. It was in 1963 that the House passed the Offices, Shops and Railway Premises Act, yet secretaries and research assistants are still being accommodated in premises in the Palace of Westminster in a manner that contravenes that Act, in terms of overcrowding and ventilation. It is not good enough to be told that there is no more room. What is wrong with the Treasury building? The Treasury could move elsewhere, and we could house our staff there.
Apart from the question of salary, we cannot expect to obtain and retain good

staff in appalling conditions. That aspect of the matter also requires urgent and comprehensive study.

11.37 p.m.

Mr. Robert Cooke: The House would wish to ensure that all those who serve us here, in whatever capacity, were properly rewarded and enjoyed reasonable working conditions. My hon. Friend the Member for Hove (Mr. Sainsbury) has given me the cue for my next remark. He said that there are too many secretaries present, and in his reference to that point, Mr. Deputy Speaker, he called you "Mr. Deputy Secretary".
I regret that I cannot speak in the capacity of an Under-Secretary at the Department of the Environment, or as a Minister of Works—a Minister that we used to have and who could wave a magic wand. The Services Committee does its best against considerable difficulties and constraint in terms of public expenditure and all sorts of other things, and in recent years we have managed to improve the conditions for Members and staff quite a lot, although none is ideal.
We have made a certain amount of progress, and I hope that with other Parliaments and other hon. Members greater progress will be made, and an even greater impetus will be given to this matter.
We have done our best to deal with the petty domestic matters that the hon. Member for Liverpool, Walton (Mr. Heffer) described in his characteristically robust way. I hope that hon. Members like him will not stop giving us their robust views, because they help enormously in getting better facilities for Members and for those who work here.
In this Palace we have done a certain amount of new infilling building and we have acquired outbuildings—Norman Shaw North, and now Norman Shaw South. But only £200,000 is to go with that building, and it is not completely kitted out, because we do not have the money. We have made considerable increases in secretarial accommodation over there, all of quite reasonable quality. But we have virtually reached the end of the road. I hope that the House will support the proposition that, having reached the end of the road with regard to doing things to this Palace and in the acquisition of not very convenient outbuildings, we must at last grasp the nettle and


deal with the Bridge Street site about which we have not been able to make up our minds for a quarter of a century.
Indeed, when the Services Committee quite soon makes a report to the House and suggests what we might do there—for the benefit of all hon. Members and, most particularly, for the staff—I hope that the House will look upon those proposals with favour and come to the end of its indecision. I also hope that whatever party is in power at the time will provide the funds with which to proceed.
I do not want to detain the House from the Lord President, who I hope will have some helpful comments to make, but I should like to say something about the agency scheme which has been talked about this evening.
As we see it, if hon. Members so desire—and only if they so desire—the Fees Office can make payments on their behalf out of their allowances to specified persons by way of salary. No doubt the Fees Office could also manage the tax arrangements and put aside money towards a pension for an employee.
I shall not rehearse again the suggestion which the Chairman of the Select Committee made at the outset, except to say that we have, through Mr. Wilkin at the Fees Office, obtained a quotation from a private outside source that if £15 a month were paid into a scheme for an individual female secretary starting at the age of 30 the basic pension at the age of 60 would be £483. That does not sound very much. But the possible pension at the age of 60, including bonuses, would be £3,970 a year or a tax-free cash sum of £9,015 and a reduced pension of £3,005. There are various other propositions here.

Mr. English: The hon. Gentleman has failed to make one point. If that were a Civil servant's salary, the sum of money which he quoted would rise in proportion to inflation which over the next 30 or 35 years might be quite substantial, whichever Government were in power.

Mr. Cooke: If the hon. Gentleman's suggestion were taken up by this Government or a future Government, it is possible, with index-linked pensions, that a different result would be arrived at. What I have given the House is one of the

schemes that would be possible under what is suggested in the report. No doubt, if the House wished to go further, it could.
Of course, some people will speculate on whether most hon. Members could get their banks to do what the Fees Office would be prepared to do. On the other hand, we have the Fees Office and we value its services on our doorstep. I am sure that the House is not anxious to create an expensive department within a department. Although we value the suggestions that have been made, some of us on the Select Committee were a bit cynical about the costs that would be involved.
If large numbers of Members did want an agency, no doubt more staff would be required. But I put it to the Lord President—I hope he will respond—that this is something which should be allowed to evolve and that we should not start off with more staff until we see how we get along.
It could be argued that those who work here and do not like it need not stay but should go where their qualifications are better appreciated. This certainly applies to the highly qualified younger secretaries. But it would be quite unfair and inhuman to make such an observation to a number—we do not know quite how many, but there must be a substantial number—who have given the greater part of their lives to the work here for very modest reward and for whom the future is most uncertain.

Mr. Fairbairn: Why does my hon. Friend always assume that they will be female? Is this not a rather dangerous assumption?

Mr. Cooke: My hon. and learned Friend should study what I was saying. I did not assume anything of the kind. I was saying that there are no doubt some young, highly qualified people who could easily get other jobs but that there are some who have worked here most of their active lives, and the future for them is most uncertain. It was particularly with them in mind—and the Chairman of the Select Committee will confirm this—that we recommended the severance indemnity to help them, hopefully into other Westminster jobs or into other forms of livelihood. That at least would do something for the immediate uncertainty between jobs.
It would appear that this matter is somewhat more complicated than we thought, and the Government now tell us that the Redundancy Payments Act should be taken into account. It may apply helpfully to some, but I believe that those in most need will find themselves outside its scope. So we need from the Lord President more than perhaps a few friendly words. Something concrete must be done about this matter lest these people find themselves in real hardship, as some of them have already.
It might be suggested that a secretaries' fund could be of some help. There is a Members' fund. Surely such a scheme could be worked out to help secretaries in difficulties. A very modest levy of £100 a year on a Member's salary would produce £60,000 a year, and an enormous amount could be done with that.
I do not think that we should ever forget that the people who have been working here all their lives spent most of it when hon. Members were paid practically nothing. I remember, when I came here 21 years ago, that Members of Parliament received £1,250 and no secretarial allowance at all. It is people who have worked here in those circumstances, when they got practically nothing for the job and who have been able to put practically nothing by, that we must think about tonight.
My hon. Friend the Member for Worthing (Mr. Higgins) made some helpful, pertinent remarks. As he is a former Treasury Minister, it was to be expected of him. But he complained that the House was not in control of its own affairs and had to go cap in hand to the Government. I am sure that he has read the Bottomley Report. If those recommendations were enacted, the House could tackle these matters and be master of its own affairs—and, if I may express a personal view, about time, too.
My hon. Friend went on to say there would be better uses for the 5 per cent. which appears in the report and which the Fees Office might be charging. I would agree with him that, if it was to be that order of expenditure, it would be much better given to those in real need and not used for the purpose that is suggested.
Then my hon. Friend alluded to the noble lord, Lord Boyle. I think that he

has quite a lot to do with all this, and I do not want to get into that bit of deep water. But no doubt it will have to be taken into consideration by the noble lord.
I want to reinforce the argument that virtually every hon. Member's requirement in this House is different from that of every other hon. Member and that the requirement can change virtually overnight. There is no more uncertain human activity than membership of the House of Commons. It was my right hon. Friend the Member for Cambridgeshire (Mr. Pym), with whom I share a small responsibility for House of Commons affairs, who once likened the progress of an hon. Member through this House as that of a man walking along the sand on the sea shore whose footprints were washed away by the tide of public opinion within a moment as though he had never been there. The hon. Member for Walton put it in a much more down-to-earth and robust way—"sacked by the electors". That is exactly what it is. For whatever cause, Members find themselves not Members of this House and unable to look after those for whom they have a real responsibility and for whom the House has a larger responsibility.
Perhaps before we depart from this Parliament we could ensure that a small but none the less significant number of those who serve us here do not end up as abandoned wreckage, because some of them will find themselves high and dry come the end of the Parliament. I hope that the Lord President will be able to suggest that we can take effective steps now to look after the future of those people for whom we have a real responsibility.

11.50 p.m.

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): Almost every speaker in the debate has urged that we should go further than the Government are suggesting in the motion in dealing with this matter. I should like to say at the outset that no one is more gratified than myself that that mood should be expressed in the House. I shall report to others who have not been present at this debate what has been said in the House this evening. I believe that what has been said this evening represents a wide feeling throughout the House.
In a few minutes' time, I should like to indicate how we should deal with some particular problem about which criticisms have been made, but I think that I am entitled to say that I am gratified about such a response, because soon after I became Leader of the House I examined the Straubenzee Report, the report produced by the hon. Member for Wokingham (Mr. van Straubenzee). I entirely agree with my hon. Friend the Member for Nottingham, West (Mr. English) that it is a most excellent report. It pointed the way to the kind of discussion that we are having tonight.
On the other hand, that Committee itself indicated that it had not reached final conclusion on matters. It said in its report that the adoption of any scheme such as that which it was outlining would require further consideration of matters of detail. Of course, it was one of those things that was partly the reason why I thought that it was necessary that we should set up a further Committee to look at the matter. Therefore, it was not, as my hon. Friend was suggesting, that I was trying to pour scorn in any sense whatsoever on the report of the hon. Member for Wokingham. I was carrying out what he suggested—that is, that we should set up a Committee and look at the matter in further detail.
Moreover, I was approached on the subject by not only Members of Parliament but also the Secretaries and Research Assistants Council, who put the case very strongly to me and urged that a fresh Committee should be set up to look into these matters.
It was at my invitation that the Services Committee set up the Sub-Committee under the chairmanship of my hon. Friend the Member for Derby, North (Mr. Whitehead) to examine the matter. I am deeply grateful to him, as I believe the whole House must be, for the detailed and skilful way in which he has brought these proposals before the House.
Now perhaps I may deal with the special matters of criticism that have been raised by the hon. Member for Rochdale (Mr. Smith). I think that almost every hon. Member who has spoken has been critical in particular on the subject of the severance pay proposals. Shortly I shall make a suggestion as to how we

should deal with that matter which I hope will meet the way in which the House has expressed itself this evening, though I wish to put on record the facts of the matter—not that I think there has been any great dispute about it.
I am not absolutely sure that when the Committee examined the matter it was aware of the distinction, at any rate, between the Member of Parliament and the secretary—that is, that secretaries are covered by the Redundancy Payments Act whereas Members of Parliament are not, and, therefore, there is a distinction between the two. It is also the fact that some secretaries would be covered by the redundancy Acts and their operations and that, therefore, if a special provision were to be made they would have an improved position as compared with some other categories of people in the country.
On the other hand, a number of secretaries in the House, either because of age or because they are married to Members, are not covered by the redundancy payments legislation. Therefore, I agree that there is an anomaly that we have not yet cured. The Government are not proposing that we should close the matter finally—indeed, we propose the very opposite. I agree with those hon. Members who suggest that the matter cannot be left as it is now, but I do not believe that it can be dealt with properly by a manuscript amendment. There are more details that must be worked out.
As a result of representations in the House and elsewhere, I suggest that the Services Committee should take back the matter immediately and examine it afresh in the light of what has been said tonight, to see how we can work out a scheme that adequately will deal with all the problems. I fully accept that the matter is urgent, and should be dealt with this Session. I believe that this is the best way of doing it.
Had I, in fact, said to those working out the scheme that this must be done before these proposals were brought forward there would have been a further delay and we would not have got the scheme operating before the beginning of the next financial year. I am eager to get ahead as quickly as possible.

Mr. Cyril Smith: For the record, I want to get the position clear. The right hon. Gentleman said that if we gave


severance pay it would put these people at an advantage over certain other employees. That is not the case. If someone in my company is declared redundant, he works out his notice and I pay him for that period. At the end he draws redundancy pay. With some hon. Members' secretaries, especially after death, there is nothing with which to pay them for the period in which they are working out their notice.

Mr. Foot: The hon. Member is saying that there are no other workers in the country who are not covered by the same consideration. I do not think that is right. But, if it were true, there are still anomalies in the present situation that must be cured. I am not suggesting that this ends the question, I am simply saying that this is the best way to approach the problem and to try to solve it.

Mr. William Clark: I am not certain that the matter should be put back to the Services Committee because it will take some time to report. I think that this is a clear-cut issue. The right hon. Gentleman the Leader of the House says that secretaries may come not under the provisions of the redundancy fund but under the fund that is paid partly by the Government and partly by the employer. But what will happen when a Member dies? The next-of-kin will have no salary or allowances. It is surely not beyond the wit of the Government to deal with this matter without the matter going to another Committee. Surely the Treasury can work out a rough scheme to provide for severance pay for secretaries of Members who cease to be Members. Members must make their own peace with their secretaries on the matter of notice of redundancy.

Mr. Foot: If there is a swifter way of working out the matter, nobody is more in favour of that course than I. If there is a speedier way of handling the matter, I shall see whether I can bring it forward to the House without its having to go to the Services Committee. I believe that in one way or another we must find a speedy solution to the problem which has been presented to the House, and I believe that the best way of proceeding is to refer the matter to the Services Committee. So far from anybody thinking that that is likely to create ob-

stacles or a blockage, I would point out that the reason that it was possible to bring forward these proposals was that we referred them to the Services Committee. If we had sought to bring forward these proposals for the establishment of an agency and other matters without obtaining general agreement in the House we would have run into difficulties.

Mr. Heffer: I wish to ask my right hon. Friend for his view about what happens on the death of a Member. Apparently, the secretary would have to claim from the Member's estate. That may be all right if the Member is wealthy, but if the Member is poor it would mean that his widow, who probably from the moment of her husband's death would be struggling, would have to consider the question of the secretary's redundancy payment. The situation is not good enough and should be examined.

Mr. Foot: I agree that these matters will probably have to be examined and solutions found. But solutions do not arise merely by saying that secretaries in this House are a unique case and that there are no analogies elsewhere. I suggest that the best solution lies in the matter being speedily referred to a Sub-Committee of the Services Committee.
I understand the impatience of hon. Members. Their views have been well expressed in this debate and could not be clearer. But it must be realised that in order to proceed we had to obtain as much general agreement as possible. I do not think we had to secure absolute unanimity, but it would have been unfortunate if any new proposals had been the subject of furious controversy in the House, particularly between the parties.
What we have done by proceeding in this way—thanks to the chairmanship of the Committee by my hon. Friend the Member for Derby, North is to produce proposals for general agreement. I believe that something can be done in respect of the redundancy proposals. But if we were to proceed on the basis of semi-diktat I do not think we would get away with it.

Dr. Bray: I am sure the House hopes to deal with these matters as expeditiously as possible. Does my right hon. Friend agree that the Services Committee should


be able to do so? Can he give an assurance that if the Services Committee is able to reach a speedy conclusion the House will be able to dispose of the matter at an early date and certainly in this Session?

Mr. Foot: Of course, the matter would have to come back to the House. This is pre-eminently a matter to be dealt with by the House. I have been seeking to ensure that it should be dealt with by the House on that basis. I agree that it would be scandalous if the matter were not dealt with in this Session. Obviously, it should be dealt with as speedily as possible. I can give that undertaking.
If we accepted the amendment, there would be considerable confusion. My hon. Friend the Member for Nottingham, West offers his suggestion as an addendum to the motion so that the whole motion would still stand, but he is proposing acceptance of the other report in general terms and one could say exactly what this would mean. The phrase in the amendment
in respect of Members who so decide".
appears to creat two levels of secretarial allowance—the old one of the previous report and the present one. It would give rise to great confusion.
I ask my hon. Friend not to vote on his amendment. It would be to the great advantage of the House if this whole matter could be settled without division. If we proceed in the way that I think best, namely, by asking the Services Committee to deal immediately and urgently with the question of severance pay, I shall ask the Committee to look at the amendment at the same time and see whether proposals along the lines of those of the hon. Member for Wokingham could be brought forward as a variation. I think that it might lead to complications, but I suggest that we should let the Committee look at it and give its advice. That would be much more sensible than passing an amendment which hon. Members may think represents their feelings but the consequences of which have not been taken fully into account.
I agree that in establishing the agency we do not want to set up a great bureaucracy to deal with the matter. In many respects, the figure of 5 per cent. of the cost in the original proposition was a

vast exaggeration. I do not think that that will be necessary. We can start on a modest basis and see how we proceed. That is the Government's proposal. We thought that it would be absurd to go along with an elaborate proposal for Members having to pay the costs of the service. That is why we brought forward our proposal for payment. I hope that the House will accept what we are proposing. I underline all the undertakings I have given about coming back to the House.
No one could be more gratified than I that the House has shown the feeling and spirit displayed in the debate which could be of great importance in achieving the result that the overwhelming majority of hon. Members want, namely, that secretaries and research workers should have far better and fairer treatment in future than they have had in the past. That is my objective, and I believe that it should be the unanimous objective of hon. Members.

Mr. Robert Cooke: It may help the right hon. Gentleman to know that my hon. Friend the Member for Croydon, North-East (Mr. Weatherill) and I, who were members of the special Sub-Committee that looked at this matter, would be happy to sit on Thursday at 12 noon, if that suits other members of the Committee, to look urgently at all these matters when we have had time to read the Official Report of this debate. Can the right hon. Gentleman confirm that he is prepared to instruct the Sub-Committee to proceed forthwith along those lines?

Mr. Foot: I do not know about Thursday. I think that it is better to take a little longer to make the preparations. If the job is to be done effectively and properly, it might take a little longer. That might be a better way of treating the matter seriously, and certainly I am wishing to do so.

Mr. English: My right hon. Friend has reasonably asked me a question. I put to him an alternative suggestion. We all accept that the phraseology of the amendment is not perfect. My right hon. Friend will realise that Back Benchers are limited in the motions that they can propose that result in the expenditure of money by the Exchequer. The amendment was phrased as near to the point as possible by an eminent Clerk of the House. I


suggest that if the House passed it, the Services Committee would have a weapon to take to the Treasury. It could say "The House wants House of Commons Members' secretaries included with House of Commons Secretaries and Civil Service secretaries in the Civil Service pension scheme."

Mr. Foot: I am saying that the amendment would only create confusion. I am not taking away any of my hon. Friend's rights. I am asking that his proposal, along with the others to which I have referred, should be considered afresh by the Services Sub-Committee. If the Committee and the Government return with a proposition for dealing with these matters that my hon. Friend finds unsatisfactory, he can table his amendment if he so wishes. Surely that is a reasonable proposal. My hon. Friend is not asked to abandon any of his rights.
I want to get the scheme established and in operation. If we ran the risk of confusing the motion by adding the addendum, we could injure the proposal. My hon. Friend will have a perfect opportunity, if he wishes, to return to his amendment if he finds that that with which we come forward is not satisfactory. I believe that that is a reasonable way of dealing with the matter, and I ask my hon. Friend to accept it.

Mr. Whitehead: Before my right hon. Friend concludes, I point out that those who served on the original Sub-Committee are all present and I believe that the intervention of the hon. Member for Bristol, West (Mr. Cooke) will be accepted, namely, that the Committee should reconvene as soon as may be authorised by the full Services Committee. I think that our feeling about the amendment of my hon. Friend the Member for Nottingham, West (Mr. English) is that if it were accepted we would graft the imprecise upon the specific. We should much prefer to graft the specific on the specific. That can best be done by having one or two further meetings of the Sub-Committee as expeditiously as possible. I hope that the House will agree to that course.

12.13 a.m.

Mr. Peter Bottomley: I intervene only briefly. I have not been in the House for more than three years, and three years ago was about the time

that the Committee under the chairmanship of my hon. Friend the Member for Wokingham (Mr. van Straubenzee) made its report.
The Lord President has just said—I regret that many of these debates take place late at night when we do not see the right hon. Gentleman at his best—that the amendment of the hon. Member for Nottingham, West (Mr. English) should perhaps be given more consideration. If it is based on a report that appeared three years ago, that is probably an indictment of the House and perhaps of the organisation of the House. Is it not such an indictment if we suddenly hear that a proposal put forward three years ago needs more consideration?
The Seventh Report from the Services Committee was published in July 1977. Since then seven months have passed. If the right hon. Gentleman expects the House to accept that some of the proposals put forward—especially those in paragraph 24—need more consideration, why was that consideration not given during the past seven months?
If it is the right hon. Gentlemen's view that the recommendation from the Select Committee is inappropriate, too imprecise, or does not take account of the provisions of the redundancy payments legislation, why was it not possible for the House to have debated the matter six months ago? The Sub-Committee would have had the opportunity to put a proposal forward in a modified form acceptable both to the Lord President and to the House.
The reason for raising this matter now, after the Lord President has spoken, is that the arrangements that the House makes for its own services, its secretaries' conditions and Members' pay need to be sorted out properly. We do not want this kind of debate every four or five months—a debate that peters out with the Lord President saying that this or that cannot be accepted or a certain proposal cannot be put down in definite terms and that the House must consider amendments, such as the one moved by the hon. Member for Nottingham, West, to the effect that in principle something should happen. The arrangements need to be sorted out. If this matter is tied up with the Bottomley Report, why have we not had a debate on it?

Mr. English: rose in his place and claimed to move, That the Question be now put.

Mr. Deputy Speaker: It is not necessary for the hon. Member to move the

Division No. 123]
AYES
[12.16 a.m.


Ashton, Joe
Hardy, Peter
Penhaligon, David


Atkinson, Norman
Heffer, Eric S.
Ross, Stephen (Isle of Wight)


Beith, A. J.
Hooson, Emlyn
Skinner, Dennis


Bottomley, Peter
Howells, Geraint (Cardigan)
Smith, Cyril (Rochdale)


Canavan, Dennis
Holye, Doug (Nelson)
Steel, Rt Hon David


Carter-Jones, Lewis
Hunt, David (Wirral)
Steen, Anthony (Wavertree)


Cook, Robin F. (Edin C)
Johnston, Russell (Inverness)
Thomas, Ron (Bristol NW)


Cope, John
Kinnock, Neil
Watkins, David


Durant, Tony
Loyden, Eddie
Winterton, Nicholas


English, Michael
McCartney, Hugh



Evans, John (Newton)
MacFarquhar, Roderick
TELLERS FOR THE AYES:


Eyre, Reginald
Newton, Tony
Mr. Russell Kerr and


Flannery, Martin
Noble, Mike
Mr. Nigel Spearing.


Fowler, Gerald (The Wrekin)
Parry, Robert





NOES


Bagier Gordon A. T.
Fairbairn, Nicholas
Prescott, John


Barnett, Guy (Greenwich)
Faulds, Andrew
Price, C. (Lewisham W)


Bates, Alf
Fernyhough, Rt Hon E.
Radice, Giles


Bowden, A. (Brighton, Kemptown)
Foot, Rt Hon Michael
Roberts, Michael (Cardiff NW)


Bray, Dr Jeremy
Ford, Ben
Roderick, Caerwyn


Brotherton, Michael
George, Bruce
Sever, John


Callaghan, Jim (Middleton amp; P)
Glyn, Dr Alan
Sims, Roger


Campbell, Ian
Goodhew, Victor
Smith, John (N Lanarkshire)


Cant, R. B.
Harrison, Rt Hon Walter
Snape, Peter


Clark, William (Croydon S)
Hawkins, Paul
Swain, Thomas


Cockroft, John
Latham, Michael (Melton)
Tinn, James


Cocks, Rt Hon Michael (Bristol S)
Le Marchant, Spencer
Ward, Michael


Cohen, Stanley
Lester, Jim (Beeston)
Weatherill, Bernard


Cooke, Robert (Bristol W)
McGuire, Michael (Ince)
Whitehead, Phillip


Cryer, Bob
Magee, Bryan
Woof, Robert


Cunningham, G. (Islington S)
Mallalieu, J. P. W.



Davidson, Arthur
Marshall, Jim (Leicester S)
TELLERS FOR THE NOES:


Dormand, J. D.
Mellish, Rt Hon Robert
Mr. Ted Graham and


Douglas-Hamilton, Lord James
O'Halloran, Michael
Mr. Frank R. White.

Question accordingly negatived.

Main Question put and agreed to.

Resolved,
That this House agrees with the Select Committee on House of Commons (Services) in their recommendations in paragraphs 9, 17, 27, 31, 32, 33, 34, 36 and 38 of the Seventh Report of the said Committee in the last Session of Parliament (H.C. 508), and that the Fees Office be authorised, in respect of secretaries and research assistants employed on Parliamentary business whose names are registered with that Office by Members, to make monthly payments of salary on behalf of such Members, if so requested, together with appropriate deductions from their secretarial allowance.

Closure as I am about to put the Question.

Question put, That the amendment be made:—

The House divided: Ayes, 37, Noes 53.

Orders of the Day — INDUSTRIAL DEVELOPMENT (OLDHAM)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jim Marshall.]

12.27 a.m.

Mr. Jim Callaghan: I should like to thank Mr. Speaker for allowing me the time and the opportunity to speak about an important planning proposal put forward by one of the neighbouring local authorities which adjoins my constituency. The proposals involve the development of a large industrial estate along the borders of my constituency. If the proposals were accepted they would materially, substantially and adversely affect the lives of my constituents, particularly those living alongside the area in Alkrington, Middleton. It is on behalf of my constituents that I wish to object to these proposals.
I should like to refer to the proposal put forward by the Oldham Metropolitan Borough Council to develop for industrial purposes land at Greengate which adjoins my constituency and which was the subject of a planning inquiry in September 1977. As the official who held the inquiry has now submitted his report and recommendation to the Secretary of State, a decision concerning this matter resides with my right hon. Friend. Consequently, I have been asked by my constituents to list their objections to the proposed industrial development plans and present them to the House. Clearly, I cannot ask my hon. Friend the Minister to give a decision tonight. That would not be fair to him or the two local authorities involved.
The issues are deep and complicated. My hon. Friend will need the wisdom and judgment of Solomon to reach a decision satisfactory to all parties. I raise my constituents' objections to the proposed plans because I agree that there is a deepseated conflict of planning strategies and therefore the objections are substantial.
At the inquiry in September objections were heard not only from individuals but from representatives of local residents and other local organisations whose credentials speak for themselves. I refer to Mr. Elliot, of the Alkrington and District Owner Occupiers Association, a notable and worthwhile body; Mr. Parker, of the Blackley Golf Club; Mr. Haigh, of the Ramblers Association; and Mr. Lee of the Peak and Northern Footpaths Society. They represent interested parties which would be adversely affected if the proposals were allowed.
I am also aware that many individuals objected to the proposals in a private capacity. I would refer specifically to county councillor Norman Weall, whose county electoral district abuts on to the application site and who has told me of the many people living in the area who have made representations to him against the proposals. He would have attended the inquiry, but was prevented by illness.
Rochdale Borough Council has also made representations opposing the proposals. Therefore, in one way and another the ordinary member of the public in my constituency has been able to make his voice heard through his elected representatives or public bodies in opposing the proposals.
But from the supporters of the proposal we have heard little, other than from the public authorities, the land owners and the prospective developers. We have not heard from local employers, industrialists anxious to move into Oldham or even from local trade union officials. The only evidence of this nature consisted of letters from agents on behalf of industrialists who might seek a site anywhere in the north-west of North Manchester. One would have expected that some of these people might attend the inquiry to support the proposal.
I say this because the proposed development is major and will require many acres of land. It has been said that the only land available in the north and the east of Manchester is on three sites of five and a half acres and only one greater than seven acres. I dispute that. I am sure that the hon. Member for Rochdale (Mr. Smith), who is present, will agree that we in the Rochdale borough have a magnificent site that we can offer to the Oldham planners. As the planners propose to provide 2 million square feet of industrial premises and 5,000 jobs over the next 10 years they indeed need a large site. As Greengate is a large site, and as a figure of 109 acres has been quoted, obviously it would suit Oldham's needs.
What then are the objections to the use of this site for industrial development? My strong objections against these proposals are that the industrial premises are to be sited on green belt land—the only green belt land that is left between Manchester, Oldham and Middleton. If that is not bad enough, the industrial premises will adjoin the beautiful Alkrington housing state estate and will, in effect, destroy the estate which, in my estimation, is one of the most attractive estates to be found anywhere in England.
To accept these proposals would also be a substantial departure from the development plan for the region, and I strongly suggest that, in the light of this substantial departure from the development plan, the planners must establish that the need for this development overrides all other considerations. I do not believe that they have done that. I believe that the longstanding green belt policy should be upheld. I believe, too, that this need for more industrial land has clashed with the need for the green belt to be safeguarded.
I must ask the Minister whether he is satisfied with the evidence provided by the planners that they have examined all alternative proposals to those for Greengate. Have they examined other land in their own borough that might be more suitable than building on green belt areas? Is it necessary to acquire such a large site as this? If the need for larger sites is not made out, could not the planners meet the demand for additional land from smaller sites within their borough, particularly those that are becoming available as a result of demolition? Have all alternative proposals really been examined? I think not.
As a former councillor on the old Middleton borough's industrial development committee, I was particularly interested in promoting the Stakehill industrial development in joint partnership initially with Oldham when it was first suggested that Oldham and Middleton were to be amalgamated under the local boundary reorganisation proposals. The Stakehill site is a substantial area of undeveloped land on Oldham's frontiers, and it has been approved by the Department for industrial use. It is a site which is much closer to the centre of Oldham than is the Greengate site. It is close to the M62, and a spur from the motorway which connects Oldham and Rochdale with the M6 links up with the site.
The head of the development company at the Stakehill industrial site, Mr. John Finlan, is reported as having said:
'Nobody from Oldham has ever been to see me, or asked to see me on site".
I suggest, therefore, that those concerned have not investigated all the possibilities that are available to them for the development of their industrial strategy. Mr. Finlan submitted that until the planners had been escorted round the site they were not in a position to say what could be done at Stakehill.
Mr. Finlan has recently been granted planning permission for 26 industrial units on the site. There are many more acres available for the development of industry in this area. Could not Oldham use this area—the area for the 26 units—rather than the green belt area in Greengate? If as has been said, there are strategic and infrastructure difficulties, could not they be overcome by the strategic planning authority?
I repeat, in terms of the strategic issue of green belt land, I feel that to allow this land to be used for industrial development would be a substantial departure from the development plan. In my submission, any proposal to take 109 acres out of the green belt would indeed have strategic implications. In this case the taking of 109 acres would remove almost the whole of the green belt in this locality.
The loss of the Greengate site as green belt land would be a very great and tragic loss to the area. Once green belt open land is lost, it is lost for ever. This is why it is a strategic issue, and why I bring it before the House tonight.
There is a further complication that I wish to draw to the Minister's attention. I refer to the proposed route of the Manchester outer ring road. If it follows the line given in the proposed plan, it will split the site in two. Until this route is settled no development at all can be commenced. I believe that this is a major factor and must be given very careful consideration before any decision on the future development of this land is reached.
We have the fact that it  be some years before the southern section of the site can be developed. This is hardly conducive to the solving of urgent industrial land problems.
Finally, I object to the loss of amenities of the residents of Alkrington. Open land of any kind is vital in an urban area, and the more built up the area, the greater value do pockets of open land acquire. The loss of the green belt land at Greengate would be a very great loss to the area. The fact that it is not available for recreation at present is immaterial and does not detract from its character. As I said, once open land is lost, it is lost for ever.
For these reasons, on behalf of my constituents, I oppose strongly the application for the use of green belt land at Greengate for industrial development purposes.

12.43 a.m.

The Under-Secretary of State for the Environment (Mr. Guy Barnett): I begin by thanking my hon. Friend the Member for Middleton and Prestwich (Mr. Callaghan) for raising this matter in the House this evening, because it illustrates very


well some of the difficult problems being faced by local authorities in our older industrial regions. It is typical of my hon. Friend that he should raise subjects like this, which as was obvious from his speech, are of great concern to his constituents. It is typical of his record as a first-class constituency Member that he should raise this matter this evening.
As my hon. Friend said, the planning proposal by Oldham Borough Council for industrial development of the Greengate land is now before my right hon. Friend the Secretary of State, following the public inquiry held last September. My hon. Friend will appreciate that it is not possible for me to anticipate the decision in any way or to discuss the particular issues which might be factors in that decision. All I can say now is that the inspector's report on the public inquiry is receiving careful attention and that the decision will be accorded the priority urged in Circular 71/77 and will be made known as speedily as possible.
Before going any further I must make special mention of this circular. Circular 71/77, which was issued with the support of the local authority associations, urged local authorities to give priority to industry across the whole range of their functions. In particular, it stated that local authorities should give priority to the handling of industrial planning applications. My Department is similarly giving priority to work affecting industrial develepoment, including the handling of planning applications and appeals.
So I can assure my hon. Friend that this case is being progressed as quickly as possible, given the need for fair analysis of all the points of view. I can equally assure him that the sorts of issues raised by the case are ones with which we in the Department are becoming increasingly familiar, and about which we are certainly concerned.
The Greengate proposal highlights with especial vividness the sort of acute conflict which faces many of the local authorities in our older urban areas in their efforts to bring new economic life to their areas. Like much of the North-West Region, Oldham has for many years been striving to overcome the legacy of the past—the bad housing conditions of many of its residents, the decline of the old basic industries on which its former pros-

perity was founded and a generally poor and depressing environment.
The town is still heavily dependent upon the textile industry and despite some success in the diversification of industry, rising unemployment in recent years has been accompanied by losses in available jobs. My hon. Friend will not need to be told of the efforts which Oldham Council has made to attract investment to the town. In this it has received help from the Government in the way of employment subsidy.
Nor will he need reminding of the outstanding initiative shown by Rochdale Council in pioneering the concept of the industrial improvement area. This concept, as hon. Members will know, has been taken up by the Government and included in the Inner Urban Areas Bill. The Government have also commissioned a study of the Rochdale industrial improvement area in order that the experience gained there, and the lessons to be learnt, might be analysed and made widely available to other authorities.
It is very significant, I think, that in Rochdale it has not been a question of the council doing it all. Once firms saw that a real effort was being made to improve the environment in which their workers had to operate, they put their own money into improving their buildings.
Furthermore, firms are seeking joint solutions to common problems—joint canteen facilities, for example—and I would like to think that the spirit of co-operation will be the normal result of declaring an industrial improvement area.
Rochdale's initiative shows that local authorities with enthusiasm and determination can do much, even under existing expenditure restraints. I understand that more than £1 million has been obtained for the Crawford Street project from the Manpower Services Commission, the EEC, and the Department of Industry.
My hon. Friend will be aware of the Government's White Paper, "Local Government and the Industrial Strategy", issued in July last year in which we emphasised the primary importance for national economic recovery of improving industrial performance and increasing productive potential. It is on the successful achievement of these economic objectives that other policies must depend. The


Government, therefore, are determined to do everything possible to create a climate in which industry and supporting businesses will flourish. To this end we are currently seeking to ensure that industry is given a higher priority across the whole range of its policies.
Evidence was given at the inquiry indicating a shortage of readily available industrial land in Oldham, which could be a constraint on future economic development. The likely future demand for industrial land must depend on the individual decisions of many industrialists as well as more general trends such as the state of the national economy.
Some general observations can, however, be made. Oldham is part of the North-West intermediate Area in which Government assistance is available for the encouragement of industrial development and regeneration by way of regional development grant for industrial buildings and selective financial assistance. As such, it might reasonably hope to interest new industrial developers in locating there, but for this to be realised some range of attractive sites which can be readily brought into use is a pre-requisite.
Furthermore, as one of Britain's older industrial towns, there is a need for modernisation of industrial premises and relocation to accommodate expansion or to allow firms to operate in a more efficient environment.
The pace of such modernisation, as of new industrial growth, cannot be predicted, but Oldham needs to retain its existing industry as well as to attract new developers. This reinforces the need for a range of suitable industrial sites. To attract the new and diverse industries which are needed to give the employment structure a viable and stable base, the council argues that it must be able to offer

new sites of reasonable size and with all services available.
However, in reaching his decision on the planning application for the Greengate site, the Secretary of State will need to have regard not only to these general considerations but also to the representations which have been made with respect to the use of this particular site. There are a number of relevant points for the Secretary of State's consideration of the application for this site.
The first is the need for the land to be retained as part of the proposed green belt and its existing and future value for agricultural or other uses of an open nature. The second is the need for land for industry in the area and the physical suitability of the application site for industrial use having regard to past excavations. The third is the likely effect of the development and of traffic generated by it on traffic flows and safety on nearby highways. The fourth is the effect the development is likely to have on the amenities of the area by reason of noise, smell, dust and smoke. Finally, there is the relationship of the site to the route for a section of a proposed trunk road—the Manchester outer ring road—which passes just to the south of the site, and to alternative routes.
My hon. Friend will agree with me that these are not straightforward matters to decide; nor are they insignificant ones for people in the area he represents.
My hon. Friend referred to the difficulty of this decision. I end by assuring him that we shall consider all these matters as carefully as we can, and I shall, of course, let him know when a decision is reached.

Question put and agreed to.

Adjourned accordingly at eight minutes to One o'clock.